Vertex AR Cover 2011 - Bombay Stock Exchange · 2011-09-08 · Kochi – 682 018 Tel. No. 0484-2384848 Fax No. 0484-2394209 e-mail id : [email protected] CORPORATE OFFICE 403,

1

ANNUAL REPORT 2010-11

Corporate Information ............................................................1

Notice .........................................................................................2

Directors’ Report ......................................................................3

Corporate Governance ............................................................7

Management Discussion and Analysis ...............................17

Auditors’ Report ....................................................................21

Balance Sheet ..........................................................................24

Profi t & Loss Account ............................................................25

Cash Flow Statement .............................................................26

Schedules to Accounts ...........................................................27

Balance Sheet Abstract ..........................................................42

Consolidated Financial Statements ............................... 43-60

CORPORATE INFORMATION

BOARD OF DIRECTORSKumar Nair - (Chairman & Managing Director)James PothenJose Thomas PolachiraU. Ramachandran

Company SecretarySandhya R. Nair

AUDITORSRahul Gautam Divan & AssociatesChartered Accountants,134, Mittal Tower, C Wing, Nariman Point, Mumbai - 400 021

BANKERSAxis BankBank of BarodaCanara BankFederal BankHDFC BankICICI BankSouth Indian BankState Bank of IndiaState Bank of Travancore

REGISTERED OFFICEThottathil Towers, 2nd Floor,Market Road, Ernakulam,Kochi – 682 018Tel. No. 0484-2384848Fax No. 0484-2394209e-mail id : [email protected]

CORPORATE OFFICE403, Regent ChambersNariman Point, Mumbai 400 021Tel. No. 91-022-6630 6090/91Fax No. 91-022-66306655e-mail id : [email protected]

REGISTRARS & TRANSFER AGENTSM/s. Link Intime India Pvt. LtdC-13, Pannalal Silk Mills CompoundLBS Marg, Bhandup (West),Mumbai 400 078Tel. No. 022-2596 3838Fax No. 022-2592 6969e-mail id : [email protected]

Contents

2

VERTEX SECURITIES LIMITED

Notice is hereby given that the Eighteenth Annual General Meeting of the Shareholders of VERTEX SECURITIES LIMITED will be held on Wednesday the 20th July, 2011 at 9.30 am at the Sharon Hall of The International Hotel, M.G. Road, Ernakulam, Kochi-682 031, to transact the following business:

ORDINARY BUSINESS

1. To receive, consider and adopt the audited Balance Sheet as at 31st March, 2011 and Profi t and Loss Account for the year ended as on that date and the report of Directors and Auditors thereon.

2. To appoint a Director in place of Mr. Jose Thomas Polachira, who retires by rotation, and is eligible for re-appointment.

3. To appoint auditors to hold offi ce from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and to fi x their remuneration. M/s Rahul Gautam Divan and Associates, Chartered Accountants, Mumbai are eligible for re-appointment.

By Order of the Board of Directors,For VERTEX SECURITIES LIMITED

Sandhya R. NairPlace: Kochi–18 Company SecretaryDate: 20.05.2011

NOTES:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND THE MEETING AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. A PROXY SHALL NOT HAVE ANY RIGHT TO SPEAK AT THE MEETING AND SHALL NOT VOTE EXCEPT ON A POLL.

2. The instrument appointing the proxy must be deposited at the Registered Offi ce of the Company not less than 48 hours before the commencement of the Meeting.

3. Members / Proxies should bring the Attendance Slip duly fi lled in for attending the meeting.

4. The Register of Members and Share Transfer Registers will remain closed from 16th July, 2011 to 20th July, 2011(both days inclusive).

5. Members requiring information on audited accounts at the meeting are requested to send the queries in writing so as to reach the Registered Offi ce of the Company at least 10 days before the meeting.

ADDITIONAL INFORMATION PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT WITH REGARD TO DIRECTOR SEEKING APPOINTMENT / RE-APPOINTMENT AT THE 18TH ANNUAL GENERAL MEETING:

Name of Director Mr. Jose Thomas Polachira

Date of Birth 01.06.1951

Date of appointment of Board

10.01.2009

Qualifi cation B. Com, CAIIB, Post Graduate Diploma in Banking, Industrial Relations & Personal Management.

Experience in Specifi c

Having 32 years experience in Banking and Stock Broking related areas.

No. of Shares held Nil

Other Directorship M/s. Maharashtra Malayalam Agro Farms (P) Ltd.M/s. Sunderwadi Farms & Realtors (P) Ltd.M/s. Bistro Foods Pvt. Ltd.

By Order of the Board of Directors,For VERTEX SECURITIES LIMITED

Sandhya R. NairPlace: Kochi–18 Company SecretaryDate: 20.05.2011

NOTICE

3


To

The Members

Vertex Securities Limited

Your Directors have pleasure in presenting before you the 18th Annual Report of the Company. The standalone Profi t & Loss account and Balance Sheet for the year ended 31st March, 2011 as audited and reported by the Auditors of the Company and also Consolidated Accounts incorporating the Profi t & Loss account and Balance Sheet of the Subsidiary Company, M/s. Vertex Commodities And Finpro Private Limited as required under the Listing Agreement are attached herewith.

FINANCIAL RESULTS:

The fi nancial highlights of the company on stand alone basis for the year ended 31st March, 2011 with corresponding fi gures of the previous year are given below:-

(Rs. in Lacs)

Financial Results 2010-11 2009-10

Total Revenue 942.45 936.44

Profi t before Depreciation, Taxation and Prior period items

6.59 99.76

Depreciation and Preliminary Expenses

44.62 43.76

Profi t/(Loss) before Tax (38.03) 56.00

Profi t/(Loss) after Tax (25.67) 27.70

Provision for Proposed Dividend on Preference Shares

-- 4.16

Provision for Proposed Dividend Tax on Preference Shares

-- 0.71

Profi t/(Loss) carried forward to Reserves

(25.67) 22.83

BUSINESS:

During the year ended 31st March, 2011 your Company earned consolidated revenue of Rs.1084.43 Lacs as compared to Rs.1045.42 Lacs in the previous year. The operations have recorded a net loss of Rs.76.80 Lacs as compared to a net profi t of Rs.32.58 Lacs in the previous year.

Detailed information on operational and fi nancial performance, etc. of the Company for the financial year is given in the Management Discussion and Analysis which is setout as Annexure to the Directors’ Report.

During the year your Company has managed to increase its talent pool by attracting high caliber, performance oriented professionals with proven track record. The Company recognises the importance and contribution of our people and performance orientation and ethics are high priority areas. The Board of Directors have introduced Vertex Employees Stock Option Plan, 2010 according to which the equity shares of the company will be offered to the key employees and Directors to motivate them and to create a better working atmosphere.

DIVIDEND

Due to loss during the fi nancial year your Directors regret that they could not recommend the dividend for the fi nancial year 2010-11.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Jose Thomas Polachira is liable to retire by rotation and is eligible for re-appointment. The resolution for appointment of Mr. Jose Thomas Polachira is being placed before the ensuing Annual General Meeting for approval.

Mr. Ashok K. Mittal has been appointed as the Whole-time Director of the Company with effect from May 20, 2011 and will hold offi ce till the ensuing Annual General Meeting.

Pursuant to Clause 49(g) (1) of the Listing Agreement with the Stock Exchange, brief resume of the Director being reappointed has been provided in the Notice convening the Annual General Meeting.

AUDIT COMMITTEE

The Audit Committee of the Board consists of the following Directors:

Mr. James Pothen, (Chairman)

Mr. U. Ramachandran.,

Mr. Jose Thomas Polachira.

The Audit Committee met fi ve times during the fi nancial year.

ALTERATION OF MAIN OBJECT CLAUSE OF THE COMPANY

During the year under review, your Company has altered its Main Object clause of the Memorandum of Association. The Registrar of Companies in his report to the High Court of Kerala during the Amalgamation proceedings had suggested that the Main Objects be modifi ed to refl ect the present activities of the company. The

DIRECTORS’ REPORT

4


earlier Main Object included the activities of non-banking fi nance companies. The company is not undertaking any Non Banking Finance Company activities and has surrendered the Certifi cate issued by the Reserve Bank of India. Further based on the Order passed by the Hon’ble High Court of Kerala on 23rd February, 2010 Transwarranty Capital Private Limited was amalgamated with the Company and all the assets, liabilities, licenses etc. of Transwarranty Capital Private Limited were transferred to the company with effect from the appointed date. Transwarranty Capital Private Limited was also undertaking institutional broking and also holding necessary license from the Securities and Exchange Board of India as a Merchant Banker. To enable your company to undertake Merchant Banking and other activities, the Main Objects of the company were suitably amended.

CHANGE IN REGISTRAR AND TRANSFER AGENT

The Company has changed its Registrar and Transfer Agent from M/s Cameo Corporate Services Limited, Chennai to M/s. Link Intime India Pvt. Ltd., C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai - 400 078. All communication relating to Transfer can now be sent to the above given address of the Transfer Agent. The Equity Shares of the Company can be dematerialised with National Securities Depository Limited and Central Depository Services (India) Limited.

CORPORATE GOVERNANCE

The Securities and Exchange Board of India (SEBI) has prescribed Corporate Governance standards. Your Directors reaffi rm their commitment to these standards and this Annual Report carries a section on Corporate Governance.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors hereby confi rm:–

a) That in the preparation of the Annual Accounts for the year ended 31st March, 2011, applicable Accounting Standards have been followed along with proper explanation relating to material departures, wherever necessary.

b) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the fi nancial year and the loss of the Company for the year ended 31st March, 2011.

c) That the Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) That the Directors have prepared the annual accounts on an ongoing concern basis.

CONSOLIDATED ACCOUNTS

The Consolidated Profi t and Loss Account for the year ended 31st March, 2011 and the Balance Sheet as on that date as required under Listing Agreement is attached herewith.

OPERATIONS OF SUBSIDIARY

During the year ended 31st March, 2011 the subsidiary company Vertex Commodities And Finpro Private Limited had total revenue of Rs.237.03 Lacs and Loss after tax of Rs.51.13 Lacs as against Rs.108.98 Lacs and Profi t of Rs.4.88 Lacs respectively in the previous year.

During the year Company has invested Rs.300 Lacs in the Equity share capital of Vertex Commodities And Finpro Private Limited thereby increasing its stake to 99.45%. This infusion of capital is to meet the capital and operational expenses of the Subsidiary.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profi t and Loss Account and other documents of the subsidiary company are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the subsidiary company and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary company will also be kept open for inspection at the Registered Offi ce of the Company and that of the subsidiary company.

The Consolidated Financial Statements presented by the Company include the fi nancial results of its subsidiary company.

PARTICULARS OF EMPLOYEES’ U/S 217 (2A) OF THE COMPANIES ACT, 1956

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, is available at the registered offi ce of your Company. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Report and Accounts are being sent to all shareholders of the Company and others entitled thereto excluding the aforesaid information. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary / Compliance Offi cer at the Corporate Offi ce or Registered Offi ce address of the Company.

DISCLOSURE OF EMPLOYEE STOCK OPTIONS

During 2009-10, the Company granted 6,55,000 Stock Options to the employees under its Employee Stock Option Plan 2010. Details as per the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure to this Report.

5


MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for 2010-11, as required under Clause 49 of the Listing Agreement, are given as a separate statement in the Annual Report.

DISCLOSURE OF ADDITIONAL PARTICULARS

In view of the nature of activities which are being carried on by the Company, the particulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 regarding conservation of Energy & Technology Absorption are not applicable to the Company.

The company has received Foreign Exchange Inward Remittance equivalent to Rs.1,74,80,463/- which is received towards Share Capital contribution.

AUDITORS

M/s. Rahul Gautam Divan & Associates, Chartered Accountants, Mumbai will retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness for re-appointment. Your Directors recommend their appointment.

LISTING PARTICULARS

The Company’s equity shares continue to be listed on the Bombay Stock Exchange.

REPLIES TO AUDITORS’ OBSERVATIONS

Attention is invited to Note No. 4(i) of the Auditors’ Report, and it is clarifi ed that the management is of the view that long term investment is having the value as specifi ed in the Balance Sheet.

Attention is invited to Note No. 4(ii) of the audit report, it is clarifi ed that the company has initiated legal / other action for recovery of the old outstanding dues and, therefore, it will not be prudent to make any provision in the accounts which may adversely affect the claim of the company.

ACKNOWLEDGEMENT

Your Directors would like to express their gratitude to the offi cials of National Stock Exchange of India Ltd., Bombay Stock Exchange Ltd., Cochin Stock Exchange Ltd., Over the Counter Exchange of India (OTCEI), National Securities Depository Limited, Central Depository Services (India) Limited and also to the Bankers. Your Directors also express their deep appreciation of the valuable services of the Offi cers and Staff Members of the Company.

For and on behalf of the Board of Directors,

Place: Kochi-18 Kumar NairDate : 20.05.2011 Chairman & Managing Director

6


Annexure A Forming Part of the Directors Report:

Disclosure in compliance with Clause 12 of the Securities and Exchange Board of India ( Employee Stock option Scheme) and (Employees Stock Purchase Scheme) Guidelines, 1999, as amended, are set below:

No Particulars VERTEX EMPLOYEES’ STOCK OPTION PLAN, 2010 {“PLAN”}1 Total number of Options under plan 10,00,0002 Option granted during the year 6,55,000 3 The Pricing formula Exercise price considered is the closing market price as

on the day preceding the date of the grant on Bombay Stock Exchange Ltd., (BSE) where the shares are listed

4 Options Vested Nil5 Options exercised N.A.6 Total No. of shares arising as a result of Options N.A.7 Options lapsed 31,5008 Variation of terms of Options Nil9 Money realized by exercisable Options N.A.10 Total No. of Options in force 623,50011. Employee wise details of Options granted

i. Senior Management personal during the year Mr. U Ramachandran - 25,000Mr. James Pothen - 25,000Mr. Jose Polachira - 25,000Mr. Ashok Mittal - 100,000

ii. Employees holding 5% or more of the total number of Option granted during the year

-

iii. Employees who were granted Options during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

Mr. Ashok Mittal - 100,000

12. Diluted Earnings Per Share (EPS) pursuant to issue of Shares on Exercise of Options calculated in accordance with (“Accounting Standard (AS) 20” Earning per share

Rs. 0.80

Where your Company has calculated the employee compensation cost using the intrinsic value of the Stock Options, the difference between the employees compensation cost so computed and the employees compensation cost that shall have been recognized if it had used the fair value of the Options, shall be disclosed. The impact of this difference on profi ts and on EPS of your Company shall also be disclosed.

Had fair value method been used , the compensation cost would have been higher by Rs.89.37 Lakhs (Previous Year Rs. Nil) Loss after tax would have been higher by Rs.89.37 Lakhs (Previous year Rs.Nil) and EPS basic would have been Rs. (1.92 ) per share (Previous Year Rs.Nil ) per share and Diluted EPS would have been Rs.(0.80) per share (Previous Year Rs.Nil)

Weighted-average exercise prices and weighted –average fair values of Options shall be disclosed separately for Options whose exercise price either equals or exceeds or is less than the market price of the stock

-

A description of the method and signifi cant assumptions used during the year to estimate the fair values of Options including the following weighted average information:1. risk free interest rate 8.32%2. expected life 5 yrs3. expected volatility 76.00%4. expected dividend yield 3.22%

5. the price of the underlying shares in market at the time of option grant

Grant price of options is the closing of the market price on Bombay Stock Exchange Ltd., (BSE) where the shares are listed on the day preceding the date of the grant, hence the price of underlying shares is same as the grant price.

7


REPORT ON CORPORATE GOVERNANCE

Mandatory Requirements:

1. COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE:Your Company is fully committed to the adoption of best governance practices and its adherence. The Company’s philosophy on Corporate Governance is to practice transparency, accountability and maintain professional approach in dealing with all its stakeholders. Your Company believes in fair dealing, strengthening the disclosure practices, timely and appropriate compliance of the applicable regulations, strategic guidance and effective monitoring by the Board and above all providing value to the shareholders and other stakeholders. The company has already put in place systems and procedures and is fully compliant with Clause 49 of the Listing Agreement.

2. BOARD OF DIRECTORS: Composition, Category, Size of the Board

The Board of Directors of the Company is a balanced one, comprising of a Managing Director and Non-Executive Directors which includes independent professionals with vast experience in various fi elds. As on 31st March, 2011 the Board consists of four members, of which one is Managing Director, two Independent Directors and one Non-executive Director.

None of the Directors of the Board is a member of more than 10 Committees or a Chairman of more than 5 Committees (as specifi ed under clause 49) across all Companies in which he is a Director. All Directors have made necessary disclosures regarding their Directorship and Committee positions occupied by them in other Companies.

The details of other Directorships, positions held either in Committees of Board of Directors as well as attendance at Board Meetings/Annual General Meeting are as follows:

Name of Director Category No. of Board meetings attended

Held Attended

Last AGM attendance

No of other Directorships

Membership/ Chairmanship

of Board Committees

Mr. Kumar Nair Chairman 6 6 No 3 2

Mr. U Ramachandran Non-Executive Director

6 6 No 6 1

Mr. Jose Thomas Polachira Independent 6 6 Yes 3 3

Mr. James Pothen Independent 6 6 Yes 1 3

Meetings of the Board:

During the year the Board met six times on 12.04.2010, 21.04.2010, 19.05.2010, 23.07.2010, 26.10.2010 and 21.01.2011.

Reappointment of Director:

Mr. Jose Thomas Polachira will retire at the ensuing Annual General Meeting and is eligible for reappointment. He is CAIIB, Post Graduate Diploma in Banking, Industrial Relations & Personal Management. He is having 32 years rich experience in Banking and Stock Broking related areas.

Information supplied to the Board

Detailed agenda notes are sent to each Director well in advance before the Board and Committee meetings. The agenda items inter-alia include Secretarial & Legal Compliance matters, business matters and fi nancial reporting. A business review presentation is made at each Board Meeting to apprise the Directors and the Senior Management team about the performance of the Company. The Board provides strategic direction and guidance in improving the performance of the Company. Business plans, annual operating and capital expenditure budgets, are also placed and reviewed by the Board along with the senior management team of the Company.

Code of conduct

The Board of directors of the Company has laid Code of Conduct for the Directors and Senior Management Personnel of the Company. All the Directors and Senior Management Personnel have affi rmed compliance with the Code of Conduct as on March 31, 2011. A declaration to this effect signed by the Managing Director forms part of this report.

8


Compliance Structure

The Board also periodically reviews status of compliance with various laws applicable to the Company and also the initiatives taken to improve the standards of compliance adherence.

3. BOARD COMMITTEES

Audit Committee:

In Compliance of the provisions of Section 292A of the Companies Act, 1956 and in accordance with the provisions of Clause 49 of the Listing Agreement, the Company is having a qualifi ed and independent Audit Committee at the Board level. The Audit Committee performs the functions and have a role in accordance with Clause 49 of the Listing Agreement. The Committee acts as a link between the management, the statutory and internal auditors and the Board of Directors and oversees the fi nancial reporting process.

Composition of Committee

The Audit Committee consists of the following three directors, two of whom are independent directors.

Name of Member

Mr. James Pothen- Chairman

Mr. U. Ramachandran Member

Mr. Jose Thomas Polachira Member

The Chairman of the Audit Committee is an Independent Director. The Chairman of the Audit Committee was also present at the previous Annual General Meeting, as mandated under the listing agreement, to answer shareholder queries. All the members of the Audit Committee are fi nancially literate and all of them have accounting and related fi nancial management expertise.

Terms of Reference

The terms of reference for the Audit Committee covers all the areas stipulated under clause 49 of the Listing Agreement. This inter-alia include the following

i) Oversight of Company’s fi nancial reporting processes.

ii) Reviewing the quarterly / annual fi nancial results, fi nancial statements before submission to the Board for approval, with particular reference to accounting policies & procedure, major accounting policies, related party transactions.

iii) Recommending to the Board, the appointment / re-appointment of Statutory Auditors and Internal Auditors and fi xation of audit fees.

iv) Approving internal audit plan and reviewing effi cacy and adequacy of internal control systems / function.

Meetings and Attendance

During the fi nancial year the Committee met 5 times on 12.04.2010, 19.05.2010, 23.07.2010, 26.10.2010 and 21.01.2011.

Attendance at the Audit Committee meeting is as under:

Name of Member Meetings attended

Mr. James Pothen (Chairman) 5

Mr. U. Ramachandran 5

Mr. Jose Thomas Polachira 5

Share Transfer & Shareholders Grievance Committee:

The Company has constituted a Share Transfer & Shareholders Grievance Committee to address various matters relating transfer of shares and to redress Shareholders grievances.

Composition

Share Transfer & Shareholders Grievance Committee consist of the following three Directors as its members.

9


Name of member

Mr. Jose Thomas Polachira Chairman Mr. James Pothen Member Mr. U. Ramachandran Member


The Share Transfer and Shareholders Grievance Committee met 11 times on 21.04.2010, 19.05.2010, 08.06.2010, 23.07.2010, 19.08.2010, 26.08.2010, 07.09.2010, 14.09.2010, 26.10.2010, 14.12.2010 and 21.01.2011.

Attendance at the Share Transfer and Shareholders Grievance Committee is as under:

Name of member Meetings attended

Mr. Jose Thomas Polachira 11 Mr. James Pothen 11 Mr. U. Ramachandran 2

Remuneration Committee:

Composition

The Company has a Remuneration Committee consisting of following three Directors, two third of whom are Independent Directors, including the Chairman.

Name of member

Mr. James Pothen Chairman Mr. Jose Thomas Polachira Member Mr. Kumar Nair Member

Terms of Reference

The terms of reference / charter of the Committee include the following:

To determine and approve the remuneration package payable to the Executive Director / Wholetime Director, Directors, other Managerial Persons and such other members of the management including salary, bonus, incentive payments, share options, stock options, pension rights, terms of employment and various other components of the compensation payable in this regard;

Key issues / matters as may be necessary in view of Clause 49 of the Listing Agreement, provisions of Companies Act, 1956 or any statutory provisions, enactments, rules and regulations as may be applicable from time to time;

Such other matters and issues as may be referred to, by the Board from time to time.


The Remuneration Committee met four times on 21.04.2010, 19.08.2010, 21.09.2010 and 14.12.2010.

Attendance at the Remuneration Committee meeting is as under:

Name of member Meetings attended

Mr. James Pothen (Chairman) 4 Mr. Jose Thomas Polachira 4 Mr. Kumar Nair l

4. MANAGERIAL REMUNERATION:

Mr. Kumar Nair was appointed as Managing Director for the period 01.04.2010 to 31.03.2013. The total remuneration paid to the Managing Director during the fi nancial year was Rs. 8.01 Lacs including perquisites.

The company pays Rs. 5,000/- to Directors towards Sitting Fees for each Board Meeting and Rs. 2,000/- for each Committee Meeting.

5. CEO/CFO CERTIFICATION:

As required under the provisions of the Clause 49 of the Listing Agreement, Mr. Kumar Nair, Managing Director of the Company has provided necessary certifi cation to the Board regarding the fi nancial statements of the Company.

10


6. SUBSIDIARY COMPANY

The Company has a wholly subsidiary company – Vertex Commodities And Finpro Private Limited which is engaged in the business of Commodity Broking.

7. MANAGEMENT DISCUSSION AND ANALYSIS

A detailed Management Discussion and Analysis Report in terms of Cause 49 of the Listing Agreement forms part of the annual report.

8. A. GENERAL BODY MEETINGS:Details of Annual General Meetings during the last 3 years.

Financial year Day, Date and Time Venue Special Resolutions Passed, if any

2007-08 Monday, 29/09/2008 10.00 AM Thottathil Towers, 2nd Floor, Market Road, Kochi, Kerala – 682 018

No

2008-09 Thursday, 10/09/2009 11.00 AM Thottathil Towers, 2nd Floor, Market Road, Kochi, Kerala – 682 018

No

2009-10 Tuesday, 14/09/2010 11.30 AM Conference Hall, Hotel Abad Plaza, M.G. Road, Ernakulam, Cochin - 682 035

Yes

B. Extra Ordinary General Body Meetings:

Details of Extra ordinary General Meetings held during the year:

Day, Date and Time Venue Special Resolutions Passed, if any

Wednesday, 21/04/2010 11.00 AM Conference Hall, Hotel Abad Atrium, M.G. Road, Ernakulam, Cochin-682 035

Yes

Monday, 09/08/2010 11.00 AM Conference Hall, Hotel Abad Plaza, M.G. Road, Ernakulam, Cochin-682 035

No

Monday, 31/01/2011 11.30 AM Conference Hall, Hotel Abad Plaza, M.G. Road, Ernakulam, Cochin-682 035

Yes

C. Postal BallotThe Company has conducted two Postal Ballots last year.First Postal ballot was conducted for amendments to the Objects clause of the Memorandum of Association pursuant to Section 17 of the Companies Act, 1956.

Particulars of Postal Ballot

Date of approval of resolution by postal

ballot

Total Ballots received and are valid

Total votes for the resolution

Total votes against the resolution

% to the total votes received for the

resolution

No. No. of Shares

No. No. of Shares

No. No. of Shares

Special Resolution under Section 17 of the Companies Act, 1956 for deletion and substitution of Main Object Clauses in the Memorandum of Association of the company.

8th June, 2010

13 3,986,683 13 3,986,683 Nil - 66.45%

11


The second Postal Ballot was conducted for necessary approval under section 81 (1A), 372A and 293 of the Companies Act, 1956.

Particulars of Postal Ballot Date of approval of resolution by postal

ballot

Total Ballots received and are

valid

Total votes for the resolution

Total votes against the resolution

% to the total votes received for the

resolutionNo. No. of Shares

No. No. of Shares

No. No. of Shares

Special Resolution for approval to grant options above 1% to identifi ed employee Mr. Ashok K. Mittal pursuant to the Vertex Employees Stock Option Plan, 2010.

31st January,

2011

19 3,877,348 19 3,877,348 Nil - 64.63%

Special Resolution for re-pricing the Vertex Employees Stock Option Plan, 2010 at Rs. 145.50/- to the employees who have been granted ESOP at much higher price than the current price.

31st January,

2011

19 3,877,348 18 3,877,308 1 40 64.63%

Ordinary Resolution pursuant to Section 293(1)(a) of The Companies Act, 1956 to create mortgages/charges/hypothecation on all or any of the immovable and moveable properties of the Company.

31st January,

2011

19 3,877,348 18 3,877,308 1 40 64.63%

Special Resolution pursuant to Section 372A of The Companies Act, 1956 to make a loan to, give a guarantee or provide security in connection with a loan and to acquire by way of subscription, purchase or otherwise, the securities of Vertex Commodities and Finpro Private Limited, on such terms and conditions as the Board may deem fi t within the overall limit of 300% of the aggregate of the Company's paid up capital and free reserves or 500% of its free reserves, whichever is more;

31st January,

2011

19 3,877,348 18 3,877,308 1 40 64.63%

No special resolution is proposed to be conducted through postal ballot as on date.

9. DISCLOSURES:

There were no transactions of material nature with the Promoters, Directors or the Management, their Subsidiaries or relatives during the period that may have potential confl ict with the interest of the company at large.

There were no non-compliances by the company during the year. No penalties or strictures have been imposed on the company by Stock Exchanges or SEBI or any statutory authorities on any matter related to the capital markets during the previous three fi nancial years.

The Board has adopted a Code of Conduct including Business Ethics Policy for its Directors and Senior Management.

The Managing Director has submitted before the Board a declaration of compliance with the Code of Conduct by the Directors during the fi nancial year ended 31st March, 2011.

The company follows the Accounting Standards issued by the Institute of Chartered Accountants of India/ the standards notifi ed by the National Advisory Committee on Accounting standards and in the preparation of the fi nancial statement, the company has not adopted a treatment different from the prescribed by any accounting standard.

Risk assessment and minimization of procedures are periodically reviewed by the Audit Committee and the Board of Directors of the company.

The Managing Director has certifi ed to the Board of Directors in compliance of Clause 49 (V) of the Listing Agreement with the Stock Exchanges in the prescribed format. This has been reviewed by the Audit Committee and taken on record by the Board of Directors.

The Company has complied with all mandatory requirements under Clause 49 of the Listing Agreement with the Stock Exchange. The adoption of non-mandatory requirements has been dealt with in this Report.

12


10. MEANS OF COMMUNICATION:

Quarterly Un-audited fi nancial results are published in leading English and Vernacular newspapers. Half yearly report is not sent separately to the shareholders. Annual Reports are sent to the Shareholders in their addresses registered with the Company and is being regularly put on the website of the Company.

11. GENERAL SHAREHOLDERS INFORMATION:

Annual General Meeting Date : 20th July, 2011Time : 9.30 amVenue : Sharon Hall of The International Hotel, M.G. Road, Ernakulam, Kochi-682 031

Financial Calendar (Tentative)Financial reporting for the quarter ending 30th June, 2011 : Last week of July, 2011Financial reporting for the quarter ending 30th Sept., 2011 : Last week of Oct. 2011Financial reporting for the quarter ending 31st Dec., 2011 : Last week of Jan, 2012Financial reporting for the quarter ending 31st March, 2012 : Last week of May, 2012 Annual General Meeting for the year ended 31st March, 2012 : August/September, 2012Date of Book Closure : 16th July, 2011 to 20th July, 2011 (both days inclusive)Listing of Shares : Bombay Stock Exchange LtdStock Code : 531950Payment of Listing Fees : Listing fee for the fi nancial year 2011-2012 has been paid.Demat ISIN for NSDL & CDSL : INE316D01016

12. STOCK PERFORMANCE:

Market Price Data during the year ended 31.03.2011:BSE

Month High Low BSE Sensex (High)

April-10 101.70 40.60 18047.86

May-10 87.50 41.95 17536.86

June-10 103.30 41.80 17919.62

July-10 103.85 80.40 18237.56

August-10 254.35 99.00 18475.27

September-10 293.75 196.30 20267.98

October-10 332.00 265.00 20854.55

November-10 390.00 310.75 21108.64

December-10 328.70 121.35 20552.03

January-11 176.75 106.50 20664.80

February-11 151.00 78.65 18690.97

March-11 176.80 94.20 19575.16

13


Registrars & Transfer Agents : M/s. Link Intime India Pvt. Ltd C-13, Pannalal Silk Mills Compound LBS Marg, Bhandup (West), Mumbai 400 078 Contact person : Mr. Joy Varghese Contact No. : 022-25963838, Fax No.: 022-25926969 Email id : [email protected]

Share Transfer System

• Securities lodged for transfer at the Registrar’s Offi ce are normally processed within 15 days from the date of lodgment, if the documents are clear in all respects. All requests for dematerialization of securities are processed and the confi rmation is given to the depositories within 15 days. Mr. K. J. Thomas is empowered to attend to transfer of shares and other investor related matters. Grievances received from investors and other miscellaneous correspondence with regard to change of address, mandates, etc are processed by the Registrars within 30 days.

• Pursuant to Clause 47 (c) of the Listing Agreement with the Stock Exchanges, certifi cates, on half-yearly basis, have been issued by a Company Secretary-in-Practice for due compliance of share transfer formalities by the Company. Pursuant to SEBI (Depositories and Participants) Regulations, 1996, certifi cates have also been received from a Company Secretary-in-Practice for timely dematerialization of the shares of the Company and for conducting a Secretarial Audit on a quarterly basis for reconciliation of the Share Capital of the Company.

Distribution of Shareholding as on 31-03-2011:

No. of equity shares held No. of share holders % of share holder Total no of shares held % of shares held

1 - 500 900 74.813 128652 2.14501 - 1000 108 8.978 87172 1.451001 - 2000 65 5.403 99075 1.652001 - 3000 26 2.161 66780 1.113001 - 4000 15 1.247 52650 0.884001 - 5000 18 1.496 87119 1.455001 - 10000 27 2.244 188167 3.14

10001 and above 44 3.657 5289336 88.17

Total 1203 100.00 5998951 100.00

Ver

tex

Hig

h

Sens

ex

450

400

350

300

250

200

150

100

50

0

20000.00

15000.00

10000.00

5000.00

0.00Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10

Months

HighLowBSE Sensex (High)

BSE Sensex Vs. Vertex

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11

14


Shareholding Pattern as on 31.03.2011:

Sl. No. Category No. of Shares % of Holding

1 Promoters & Persons acting in Concert 38,39,648 64.01

2 Mutual funds / UTI / Banks / FIs NIL NIL

3 Private Corporate Bodies 8,26,780 13.78

4 NRIs / OCBs NIL NIL

5 Indian Public 13,32,523 22.21

Grand Total 59,98,951 100.00 Dematerialization of shares 99.41% of the shares have been Dematerialized by the members so farOutstanding GDRs/ADRs/Warrants or any convertible/ instruments, conversion data and likely impact on equity

Pursuant to the Scheme of Amalgamation of Transwarranty Capital Private Limited and Vertex Securities Limited and the order passed by the Honorable High Courts of Bombay and Kerala 83,00,715 0.5% Fully Convertible Preference Shares shall be compulsorily converted into one equity share of Rs.10 each fully paid up at par, any time from the end of fi rst year to the end of fi fth year from the date of Allotment. These shares were allotted on 30.03.2010.

Plant location Not applicable

Other General Information

i) Shareholders holding shares in physical form are requested to notify to the Company, change in their address / PIN Code Number and Bank Account details promptly by written request under the signature of sole / fi rst joint holder.

ii) Benefi cial owner of shares in demat form are requested to send their instructions regarding change of name, change of address, bank details, nomination, power of attorney etc, directly to their DP.

iii) For expeditious transfer of share, shareholders should fi ll in complete and correct particulars in the transfer deed. Further, please note that SEBI vide its circular no MRD/ DoP/Cir-05/2009 dated 20.05.2009 has made it mandatory for transferee(s) to furnish a copy of PAN card to the Company / RTAs for registration of physical transfer of shares. All the intended transferee(s) are, therefore, requested to furnish a self attested copy of PAN Card at the time of sending the request for physical transfer of share certifi cate.

iv) Section 109A of the Companies Act, 1956 extends the nomination facility to individuals holding shares in the physical mode. Shareholders, in particular, those holding shares in single name may avail the above facility by furnishing the particulars of their nominations in the prescribed Nomination Form, which can be obtained from the Company / RTA by sending a written request.

Address for correspondence : Vertex Securities Limited Thottathil Towers, 2nd Floor, Market Road, Kochi, Kerala – 682 018 Phone: 91-484-2384848

Contact person : Ms. Sandhya R. Nair, Email: [email protected]

Shri. K. J. Thomas, Email: [email protected]

Non-mandatory requirements:I. Chairman of the Board – Separate offi ce is maintained for the Executive Chairman. Mr. Jose Thomas Polachira and Mr. James Pothen are Independent Directors on the Board of the Company. No specifi c period has

been specifi ed for these Directors. All the directors have requisite qualifi cation and experience and in the opinion of the Company this would enable them to contribute effectively to the Company in their capacity as Independent Directors.

II. Shareholder Right – The Company has not sent half yearly fi nancial performance including summary of the signifi cant events to each household of the shareholders, since the results were published in 2 newspapers, one in Vernacular and one in English newspaper.

III. Training of Board Members – The Directors interact with the management in a very free and open manner on information that may be required by them.

IV. Mechanism for evaluation of Non-Executive Board Members – The evaluation process is yet to be formulated by the Board.

15


DECLARATION

In accordance with Clause 49 of the Listing Agreement with the Stock Exchange, I hereby confi rm that, all Board Members and Senior Management personnel of the Company have affi rmed compliance with the Code of Conduct and Ethics during the fi nancial year ended March 31, 2011.

Place : Kochi Kumar NairDate: 20.05.2011 Chairman and Managing Director

CEO/ CFO CERTIFICATION:

We hereby certify to the Board that:

a) We have reviewed the fi nancial statements and the cash fl ow statements for the year and to the best of our knowledge and belief:

(i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading

(ii) These statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.

b) There are to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violate the Company’s Code of Conduct.

c) We accept the responsibility for establishing and maintaining internal controls for fi nancial reporting and that, we have evaluated the effectiveness of the internal control systems of the Company pertaining to the fi nancial reporting and have disclosed to the auditors and the Audit Committee, defi ciencies in the design or operation of such internal controls, if any of which we are aware and the steps we have taken or propose to take steps to rectify these defi ciencies.

d) We further certify that:

i) There have been no signifi cant changes in internal control during the year;

ii) There have been no signifi cant changes in accounting policies during the year, except the Company has adopted Accounting Standard 15 – Employees Benefi ts (Revised 2005) issued by the Institute of Chartered Accountants of India; and

iii) To the best of our knowledge, there have been no instances of fraud, involving managements or an employee having a signifi cant role in the Company’s internal control systems.

For Vertex Securities Limited

Place: Kochi Kumar NairDate: 20.05.2011 Chief Executive Offi cer

16


COMPLIANCE CERTIFICATE

To

The Members of


We have examined the compliance of conditions of Corporate Governance by M/s. Vertex Securities Limited for the year ended March 31, 2011, as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the fi nancial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that in respect of investor grievances received during the year ended March 31, 2011, no investor grievances are pending for a period exceeding one month against the company as per the records maintained by the Company.

We further state that such compliance is neither an assurance as to the further viability of the Company nor the effi ciency or effectiveness with which the management has conducted the affairs of the Company.

(K. P. GOPIMOHAN)Practising Company Secretary

Place : Kochi (C.P. No.2912)

Date : 19.05.2011

17


Vertex Securities Limited (Vertex) is engaged in the following businesses: - 1. Vertex and its subsidiary company are engaged in the business

of broking with close to 250 offi ces pan India with strong footprint in southern and western India. The business caters to retail, HNI and institutional clients.

The company currently provides brokerage services in Equity, Equity derivatives and Currency derivatives segments.

2. Commodity broking service is provided through its subsidiary company, Vertex Commodities and Finpro Pvt Ltd (VCFPL).

3. Merchant banking. Vertex has membership of: -

a. National Stock Exchange of India Ltd., (NSE)b. Bombay Stock Exchange Ltd., (BSE)c. Cochin Stock Exchange Ltd., (CSE)d. OTC Exchange of India (OTCEI)e. NSDL (for depository services)f. SEBI registration as a Merchant Banker.

g. MCX - Stock Exchange Ltd., VCFPL has membership of following commodity exchanges:

a. Multi Commodity Exchange of India (MCX)b. National Commodity and Derivative Exchange (NCDEX)c. National Multi Commodity Exchange (NMCE)d. National Spot Exchange of India (NSEIL)

VERTEX SECURITIES LIMITEDDuring the year ended 31st March, 2011 your Company earned consolidated revenue of Rs.1084.43 Lacs as compared to Rs.1045.42 Lacs in the previous year. The operations have recorded a net loss of Rs.76.80 Lacs as compared to a net profi t of Rs.32.58 Lacs in the previous year.Talent & TeamAs per the strategy, the company focused on consolidating its talent pool and evolving as a sought after employer in the business of capital market intermediation. During the year, Mr. Ashok Mittal, a veteran in broking business took over the reins of the company as its Chief Executive Offi cer (CEO). Mr. Sandeep Rajani, a seasoned research professional joined as head of equity business. He has within a short period, built one of the fi nest equity research teams in business currently. The appointment of new regional managers and branch managers to focus more on sales and business development activities together with all the other senior level appointments should yield results in the coming years. The institutional empanelment, which required to be renewed after the completion of the merger process, is progressing well and most of the empanelment should get renewed this year with some new ones too.

The company believes that its human resources would be the key differentiator to provide the competitive edge and accordingly has a very progressive human resources policy. All high performing employees are rewarded by way of attractive incentives and a generous ESOP policy.

The company strives to provide the right ecosystem for the talent to thrive and morph into successful teams.

Talent wins games, but teamwork and intelligence wins championships - Michael Jordan

Trust

Building the brand “Vertex” is high on the agenda and there is a concerted effort towards this. Key company offi cials have been appearing regularly on the electronic and print media. The company is conducting a series of educational seminars on capital market, investment strategies, technical and fundamental analysis in various parts of the country. All the employees are put through training programs and are expected to be certifi ed professionals in equity markets. The brand Vertex is being positioned to represent a company, where “knowledge creates value” on the 4 pillars of “Talent”, “Trust”, “Transparency” and “Technology”.

Transparency

Vertex follows a very high level of corporate governance, where the board of directors is involved in every key decision impacting the company. The CEO manages the company with a clearly defi ned framework laid down by the board including annual business plan, where every aspect of the business is well defi ned. All the managers meet together to debate, discuss and fi nalize the business plan. The operational decisions are taken by the Management Committee (MC) comprising of the CEO and the senior management team.

Every quarter, the CEO presents the MIS to the board with variance analysis and action taken report.

Technology

The company recognizes that technology would be another key differentiator and has commenced making investments to upgrade its technology capabilities.

Business

For FY 2011-12, the company shall continue to focus on the same geographical areas with plan to expand and open few more branches in different locations and also strengthen its presence in western India. The company would increase its focus on institutions, corporate clients, high net worth individuals and family offi ces to grow the business.

VERTEX COMMODITIES AND FINPRO PVT LTD

During the year ended 31st March, 2011 the subsidiary company Vertex Commodities And Finpro Private Limited had total revenue of Rs.237.03 Lacs and Loss after tax of Rs.51.13 Lacs as against Rs.108.98 Lacs and Profi t of Rs.4.88 Lacs respectively in the previous year.

MANAGEMENT DISCUSSION AND ANALYSIS

18


As mentioned above, considering the high business potential in commodities segment the company hired a high performing, talented team in this segment to drive not only retail at the branches, but also HNI and corporate business. The company took membership of NSEIL to attract high net worth (HNI) clients for arbitrage opportunities and physical deliveries in the market. The Surveillance and Risk Management (SARM) operation has been shifted to Mumbai considering the volatility and the infrastructure in Mumbai offi ce to provide continuous support. The company also increased its presence in media for brand building.

Broking Industry: Equities and Commodities segment

Market capitalization of India as a proportion of world market cap has risen to a record high. According to data sourced from Bloomberg, the country’s market capitalization as a proportion of the world market cap is currently 3.34 per cent. India’s current market-cap is US$ 1.55 trillion as compared with world market-cap of US$ 46.5 trillion. This is higher than 3.12 per cent share India enjoyed at the market peak of January 2008.

The Indian equity broking industry has gained momentum in terms of scope and scale. The industry has tremendous opportunities as the country moves toward significant growth in its GDP. Competition in the broking space has intensifi ed with entry of new fi rms and recognized brands with strong balance sheets. With the Indian securities market experiencing rapid growth and fi nancial integration gaining speed, the role of intermediation will strengthen further. However, in the long term, quality and maturity of services would determine the success and sustainability of fi rms in this industry. Key factors driving growth and success in the broking industry would be distribution networks, diversifi cation of services, expertise and research, transparency and disclosure,

and compliance and market integrity. Technology will be one of the key growth drivers since ability to scale up businesses and engage customers and yet manage costs can only be possible with state-of-the-art technology in place. Customers require access to latest information and analytical tools, to engage effectively in the capital markets due to the real-time environment in which we operate. (source D&B report)

As per Dun & Bradstreet report “India’s Leading Broking Houses 2010” covering leading broking fi rms. Equity broking terminals consisting of NEAT, BOLT and CTCL licenses are the key in determining the size of an equity broking company. There are approximately 189 equity broking fi rms which have a total of 144,346 trading terminals, 21,013 branches/ offi ces, and 77,125 employees across the country. Furthermore, almost 70% of the 189 companies profi led in the publication reported a total sub-broker base of 37,213. 17% of the 189 companies have 80% of the total trading terminals provided by such companies.

While the volumes in equity cash segment (NSE and BSE) have started picking up slowly last year after a steep drop in 2009-10; the market witnessed growth in F&O segment with higher focus on options side. At the same time commodities market volumes continued to grow at very fast pace due to increase in prices of commodities and higher participation. As per FMC data the segment grew by about 50% when compared to last year although highest contributing commodities remained bullions, base metals and energy products. The volume in agri commodities remained subdued.

The Exchanges have Launched New product like Gold ETF and Mutual Fund Service System (MFSS). These have seen healthy growth in last few months since their launch.

Below is the graphic presentation on growth of markets in India: -

NSE Cash segment growth – 26.66% CAGR from 2001-2002 to 2010-11

19


Currency derivatives segment

MCX Stock Exchange Limited (MCX-SX) and National Stock Exchange (NSE) offers platforms for trading in currency futures. The currency derivatives segments operate under the regulatory control of the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI). With a large number of banks, corporates, and brokerage houses as trading members, both the exchanges have been providing the desired liquidity and depth for all categories of users. Further, the exchanges guarantee settlement of all transactions that will enhance safety by eliminating counterparty risk.

Currency futures are a linear product. It means that the losses as well as profi ts for the buyer and the seller of a futures contract are unlimited.

As the date of expiration comes near, the basis reduces - there is a convergence of the futures price towards the spot price. On the date of expiration, the basis is zero. If it is not, then there is an arbitrage opportunity. Arbitrage opportunities can also arise when the basis (difference between spot and futures price) or the spreads (difference between prices of two futures contracts) during the life of a contract are incorrect.

NSE Derivatives segment growth – 44.76% CAGR from 2003-2004 to 2010-11

Commodity Derivatives segment growth – 39% CAGR from 2005-2006 to 2010-11

20


In determining profi ts and losses in futures trading, it is essential to know both the contract size (the number of currency units being traded) and also the value of tick. A tick is the minimum trading increment or price differential at which traders are able to enter bids and offers. Tick values differ for different currency pairs and different underlying.

Futures markets were designed to solve the problems that exist in forward markets. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. But unlike forward contracts, the futures contracts are standardized and exchange traded. To facilitate liquidity in the futures contracts, the exchange specifi es certain standard features of the contract. A futures contract is standardized contract with standard underlying instrument, a standard quantity and quality of the underlying instrument that can be delivered, (or which can be used for reference purposes in settlement) and a standard timing of such settlement. A futures contract may be offset prior to maturity by entering into an equal and opposite transaction.

Mutual Funds

The Indian Mutual fund industry has witnessed considerable growth since its inception in 1963. The Assets under Management (AUM) was US$ 96.46 billion, US$ 165.83 billion and US$ 157.6 billion in FY09, FY10 and FY11 respectively, albeit encompassing some shortfalls in AUM in FY11 due to business cycles.

The average assets under management of the mutual fund industry stood at US$ 419.88 billion for the last three fi nancial years, according to the data released by Association of Mutual Funds in India (AMFI).

Vertex Securities Limited and its parent company, Transwarranty Finance Limited, together represent a full service, Investment Banking, Brokerage and Financial Services Group. Excellent domain expertise combined with a strong client and institutional relationship network nurtured over 20 years has ensured that both the companies are well poised to unlock value for its shareholders in the fast evolving fi nancial landscape in India.

Transwarranty Finance Limited, being an independent, professionally managed NBFC, the company is hopeful of securing the license to commence commercial banking when Reserve Bank of India (RBI) issues fresh licenses after satisfying all the requirements prescribed by RBI including Net worth criteria.

Internal control systems and their adequacy

The CEO/CFO certifi cation provided in the report discusses the adequacy of our internal control systems and procedures.

Human Resource Development

The most important asset of the company is its Human Resources. The company has introduced attractive ESOP scheme for sharing of wealth with employees.

Cautionary statements

Statements in the Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectation may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.

21


AUDITOR’S REPORT

ToThe Members,VERTEX SECURITIES LIMITED

1. We have audited the attached Balance Sheet of Vertex Securities Limited as on 31 March 2011, the Profi t and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, as amended, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifi ed in paragraphs 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that:

i) Attention is invited to Notes on Accounts point no.15 of Schedule 17, regarding evaluation of long term investment by the management. We have relied upon the confi rmation by the management in the absence of independent external evaluation.

ii) As stated in Notes on Accounts point no.4 of Schedule 17, sundry debtors under the head current assets include old outstanding dues. The sundry debtors outstanding for more than six months amounts to Rs.20.02 million. Further out of the total sundry debtors, for a sum of Rs.11.79 million, the Company has initiated legal and recovery actions, the proceedings of which are in different stages.

In view of the above, the quantum of realisability of old outstanding sundry debtors/ legally initiated debts is not ascertainable at this stage.

iii) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

iv) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

v) The Balance Sheet, Profi t and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

vi) In our opinion, the Balance Sheet, Profi t and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 to the extent applicable;

vii) On the basis of representations received from the directors as on 31 March, 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualifi ed as on 31 March 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

viii) Subject to our comments in paragraphs 4(i) and (ii) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2011;

b) in the case of the Profi t and Loss Account, of the loss for the year ended on that date; and

c) In the case of Cash Flow Statement, of the cash fl ows for the year ended on that date.

For and on behalf ofRahul Gautam Divan & Associates

Chartered Accountants(ICAI Reg. No: 120294W)

Rahul DivanPlace: Mumbai PartnerDate: 20 May 2011 Membership No: 100733

22


i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fi xed assets.

(b) All the assets have been physically verified by the management at the end of the year and, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verifi cation.

(c) There was no substantial disposal of fi xed assets during the year.

ii) The company had no inventory during the year. Since the company has no inventory, clauses 4 (ii) (a), (b) & (c) of the Order are not applicable.

iii) a) The company has granted interest-free unsecured loans and deposits to companies covered under Section 301 of the Companies Act, 1956 during the year. The maximum amount granted during the year was Rs. 33,690,278 and the year end balance of the loans granted is Rs. 30,020,278.

b) In our opinion the rate of interest and other terms and conditions of said interest-free unsecured loans were not, prima facie, prejudicial to the interest of the company.

c) The company was regular in receiving the principal amount as per the terms and conditions of the agreement.

d) There is no overdue amount of loans granted by the company.

e) The company has taken interest-free unsecured loan from a company covered under Section 301 of the Companies Act, 1956. The year end balance of the loan taken is Rs. 28,633,163.

f) In our opinion the rate of interest and other terms and conditions of said interest-free unsecured loans were not, prima facie, prejudicial to the interest of the company.

g) The company was regular in paying the principal amount as per the terms and conditions of the agreement.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the

company and the nature of its business with regard to purchase of fi xed assets and sale of services. During the course of our audit, no major weakness has been noticed in the internal control systems in these areas.

(v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us the company has not accepted deposits from the public.

(vii) In our opinion and according to the information and explanation given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) The maintenance of cost records have not been prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 for the year under report.

(ix) (a) According to the records of the Company and information and explanations given to us, the Company has been regularly depositing with the appropriate authorities undisputed statutory dues including Provident Fund, Employee State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs Duty Excise Duty, Cess and any other statutory dues applicable to it. There are no undisputed statutory dues as referred to above as at 31 March 2011 outstanding for a period of more than six months from the date they become payable

(b) According to the information and explanation given to us and the records of the Company examined by us, disputed amounts of taxes have not been deposited with the authorities as at 31 March 2011 as per details given below:

ANNEXURE TO THE AUDITOR’S REPORT(Annexure referred to in paragraph 3 of the Auditors’ Report of even date to the

Members of Vertex Securities Limited on the accounts for the year ended 31 March 2011)

Nature of Stuate Nature of dues Amount Rs.

Period to which amount relates

Forum where the dispute is pending

The Income Tax Act, 1961 Tax/Interest 1,111,010 AY 2007-08 The Commissioner of (Appeals)Finance Act Tax/Penalty 497,512 2001-02 to 2005-06 The Customs, Excise and

Service tax Appellate Tribunal.

23


(x) In our opinion the company has no accumulated losses at the end of the fi nancial year. The company has incurred a cash loss during the fi nancial year. No cash loss was incurred in the immediately preceding fi nancial year.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a fi nancial institutions, banks or debenture holders.

(xii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that since the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, it is not required to maintain records in respect thereof.

(xiii) The Company is not a chit fund/nidhi/mutual benefi t fund/society to which the provisions of special statue relating to chit fund are applicable. Accordingly paragraph 4(xiii) of the Order is not applicable.

(xiv) In respect of shares, securities etc. held as investments by the company, proper records have been maintained of the transactions and contracts and timely entries have been made by the company therein and the said investments have been held by the company in its own name.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company had given guarantees for loans taken by its subsidiary company and others from banks were not prejudicial to the interest of the company. The outstanding guarantees at the end of the year were Rs. 60 million which are shown as an contingent liabilities.

(xvi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and an overall examination of the Balance Sheet and Cash Flows of the company as at 31 March 2011, we report that funds raised on short term basis have not been used for long term investment.

(xviii) During the year, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraph 4(xviii) of the Order is not applicable.

(xix) The Company has not issued any debentures during the year ended 31 March 2011. Accordingly, paragraph 4(xix) of the Order is not applicable.

(xx) During the year ended 31 March 2011, the Company has not raised money by way of public issue. Accordingly, paragraph 4(xx) of the Order is not applicable.

(xxi) Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit for the year ended 31 March 2011.




24


Schedule As at 31.03.2011

(Rs.)

As at31.03.2010

(Rs.)I. SOURCES OF FUNDS

1. Shareholders Fund :a) Share Capital 1 145,772,460 145,772,460b) Share Capital Suspence Account 1 A 3,500,000 3,500,000c) Share Application Money 17,480,272 - d) Reserves & Surplus 2 4,439,941 7,007,050

2. Loan Funds 3 a) Secured Loan 868,165 9,276,688b) Unsecured Loan 33,633,163 15,079,161

3. Deferred Tax Liability 1,756,318 2,992,300TOTAL 207,450,319 183,627,659

II. APPLICATION OF FUNDS1. Fixed Asset : 4 a) Gross Block 60,436,546 58,632,522 b) Less : Depreciation 35,620,862 31,700,796 c) Net Block 24,815,684 26,931,7262. Investments: 5 58,410,100 28,407,7003. Current Assets, Loans & Advances: a) Inventories 6 - 84,827 b) Sundry Debtors 7 35,525,369 43,460,881 c) Cash & Bank Balances 8 85,336,287 48,269,478 d) Loans & Advances 9 96,079,327 124,443,823

TOTAL (A) 216,940,983 216,259,009Less: Current liabilities & Provisions a) Liabilities 10 91,334,567 86,519,129 b) Provisions 1,381,881 1,451,647

TOTAL (B) 92,716,448 87,970,776Net Current Assets TOTAL (A)-(B) 124,224,535 128,288,233

TOTAL 207,450,319 183,627,659Notes on Accounts 17The Schedule referred to above and attached notes form an integral part of the Balance Sheet

As per our attached report of even date Rahul Gautam Divan & Associates For and on behalf of Board of DirectorsChartered Accountants Rahul Divan Kumar Nair U. Ramachandran Partner Chairman and Managing Director Director James Pothen Jose Thomas Polachira Sandhya R. Nair Director Director Company Secretary

Mumbai Kochi-18May 20, 2011 May 20, 2011

BALANCE SHEET AS AT 31st MARCH, 2011

25


Schedule For the year ended on31.03.2011

(Rs.)

For the year ended on31.03.2010

(Rs.)INCOMEIncome from operations 11 72,443,627 82,426,018 Other Income 12 21,800,931 11,218,328

TOTAL 94,244,558 93,644,346 EXPENDITUREEmployees' Remuneration and Benefi ts 13 35,729,113 25,905,299 Operating Expenses 14 35,654,635 38,036,234 Administrative Expenses 15 19,693,651 18,113,002 Interest & Finance Charges 16 2,508,384 1,614,284

TOTAL 93,585,783 83,668,819 PROFIT BEFORE DEPRECIATION, TAXATIONAND PRIOR PERIOD ITEMS 658,775 9,975,527 Less: Depreciation/ Amortisation 4,461,866 4,375,336 PROFIT (LOSS) BEFORE TAXATION AND PRIOR PERIOD ITEMS (3,803,091) 5,600,191 Provision for taxes Current Tax - 1,371,000 Deferred Tax (1,235,982) 1,344,400 Prior period Taxes exess provision written off /(written back) Income Tax - 115,019

TOTAL (1,235,982) 2,830,419 PROFIT (LOSS) AFTER TAX (2,567,109) 2,769,772 APPROPRIATIONS:Proposed Dividend on 15% Non Cumulative Redeemable Preference Shares - 416,370 Dividend tax on above - 70,762

TOTAL - 487,132

BALANCE PROFIT (LOSS) CARRIED TO RESERVES AND SURPLUS (2,567,109) 2,282,640

Earning Per Share (Equity shares of face value Rs.10/- each)Basic EPS (0.43) 0.38Diluted EPS (0.18) 0.16Notes to Accounts 17The Schedule referred to above and attached notes form an integral part of the Balance Sheet



PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2011

26


CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2011

Particulars 2010-11(Rs.)

2009-10(Rs.)

A. Cash Flow from Operating Activities Net Profi t (Loss) Before taxation (3,803,091) 5,600,191 Adjustments for: Add/(Less):

Depreciation/Amortisation 4,461,866 4,375,337 Loss on assets sold/ written off 359,610 174,227 Interest Paid & Bank Guarantee Expense 2,508,384 1,614,284 Interest Received (3,846,160) (3,139,077)Profi t on share trading - (1,335)Bad debts written off 167,525 1,321,688

Operating Profi t before working Capital Changes (151,865) 9,945,315 Adjustments for Changes in Working Capital

Trade & Other Receivable-Decrease/(Increase) 7,767,986 (11,977,587)Inventories-Decrease/(Increase) 84,827 2,362 Loans & Advances(Net)-Decrease/(Increase) 25,452,195 (3,139,472)Trade payables-(Decrease)/Increase 4,815,438 (31,719,123)Other payables-(Decrease)/Increase 260,455 374,208

Cash Generated from operations 38,229,036 (36,514,297)Income Tax and Fringe Benefi t Tax paid (432,699) (278,049)Net Cash fl ow from Operating Activities (A) 37,796,337 (36,792,346)

B. Cash Flow from Investing Activities Purchase of Fixed Assets (2,752,985) (4,271,787)Investments in subsidiary company (30,002,400) - Sale of Fixed Assets 47,551 879,802 Interest Received Less Accrued 3,846,160 3,140,412 Inter corporate deposit 3,345,000 31,346,743 Net Cash used in Investing Activities (B) (25,516,674) 31,095,170

C. Cash Flow from Financing Activities: Share application money 17,480,272 - Receipt/Repayment of Secured Loans(net) (8,408,523) 2,681,811 Interest Paid & Bank Guarantee Expense (2,508,384) (1,614,284)Dividend paid (330,221) (487,132)Un-secured loan 18,554,001 (3,323,073)Net Cash used in Financing Activities (C) 24,787,145 (2,742,678)

Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) 37,066,809 (8,439,854) Cash & Cash Equivalents as at the beginning of the year 48,269,478 56,709,332 Cash & Cash Equivalents as at the end of the year 85,336,287 48,269,478

As per our attached report of even date Rahul Gautam Divan & Associates For and on behalf of Board of DirectorsChartered Accountants Rahul Divan Kumar Nair U. Ramachandran Partner Chairman and Managing Director Director James Pothen Jose Thomas Polachira Sandhya R. Nair Director Director Company SecretaryMumbai Kochi-18May 20, 2011 May 20, 2011

27


SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2011

As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)

SCHEDULE - 1

CAPITAL

AUTHORISED CAPITAL:

1) 10,820,000 EQUITY Shares of Rs 10/- each 108,200,000 108,200,000

2) 8,620,000 Preference shares of Rs.10/- each 86,200,000 86,200,000

3) 40,000 Non-Cumulative Redeemable Preference shares of Rs. 100/- each 4,000,000 4,000,000

198,400,000 198,400,000

ISSUED, SUBSCRIBED AND PAID UP CAPITAL :

5,998,951(P.Y 5,998,951) Equity Shares of Rs 10/- each fully paid up 59,989,510 59,989,510

a. 320,000(P.Y.320,000)Equity Shares issued for consideration other than cash

b. 820,950 (P.Y. 820,950) Equity Shares of Rs.10 each issued as fully paid up to the shareholders of erstwhile Transwarranty Capital (P) Limited as per the scheme of amalgamation.

c. 3,536,698 (P.Y. 3,936,698) Equity Shares of Rs.10 each are held by Transwarranty Finance Limited., the Holding Company.

8,300,715 (P.Y. 8,300,715) 0.5% Fully Convertible Preference shares of Rs.10/- each fully paid up 83,007,150 83,007,150

(8,300,715 (P.Y. 8,300,715) Preference Shares of Rs 10 each issued as fully paid up to equity share holders of erstwhile Transwarranty Capital (P) Limited. as per the scheme of amalgamation)

NIL (P.Y. 27,758) 15% Non Cumulative Redeemable Preference Shares of Rs. 100/- each issued to erstwhile Preference

Shareholders of Transwarranty Capital (P) Limited.) 27,758 (P.Y NIL) 15% - 2,775,800

Non Cumulative Redeemable Preference Shares of Rs. 100/- each 2,775,800 -

TOTAL 145,772,460 145,772,460

SCHEDULE- 1 A:

SHARE CAPITAL SUSPENCE ACCOUNT

31,500 (P.Y. 31,500) Equity Shares of Rs 10 each to be issued as fully paid up to the share holders of erstwhile Transwarranty Capital (P) Limited As per the scheme of amalgamation 315,000 315,000

318,500 (P.Y. 318,500) Preference Share shares of Rs 10 each to be issued as fully paid up to the share holders of erstwhile Transwarranty Capital (P) Limited. As per the scheme of amalgamation 3,185,000 3,185,000

3,500,000 3,500,000

28


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)

SCHEDULE - 2

RESERVES & SURPLUS

Profi t & Loss Account

As per last Balance sheet 928,159 5,440,786

Less: Accumulated loss of Amalgamating company - 7,895,836

928,159 (2,455,050)

Add: Change in Accounting Policy - 1,100,569

928,159 (1,354,481)

Add: Profi t/(Loss) for the current year (2,567,109) 2,282,640

(1,638,950) 928,159

Reserve on Amalgamation Account 6,078,891 6,078,891

TOTAL 4,439,941 7,007,050

SCHEDULE - 3

LOAN FUNDS

a ) Secured Loans

From HDFC BANK for Vehicle

(Secured by hypothecation of vehicle - Motor Car-Skoda) 837,580 1,046,457

(Repayable with in one year Rs.3,01,740/-) From ICICI BANK for Vehicle

(Secured by hypothecation of vehicle - Motor Car-Zen) 30,585 200,416

(Repayable with in one year Rs.1,84,548/-) Bank Overdraft

(Secured against pledge/ lien of Fixed Deposit of Rs.62.89 Lakhs) - 7,417,556

Term Loan from banks

(Secured against pledge/ lien of Fixed Deposit of Rs.62.89 Lakhs) - 612,259

(Repayable with in one year Rs.6,12,260/-)

TOTAL 868,165 9,276,688

b) Unsecured Loans

Inter-corporate Loans 33,633,163 15,079,161

TOTAL 33,633,163 15,079,161

29

ANNUAL REPORT 2010-11SC

HED

ULE

— 4

FIXE

D A

SSET

S

NA

ME

OF

ASS

ETS

GR

OSS

BLO

CK

DEP

REC

IATI

ON

NET

BLO

CK

As a

t 01

.4.20

10A

dditi

ons

Dur

ing

the

Year

Del

etio

n du

ring

the y

ear

As a

t 31

.3.20

11U

p to

31

.3.20

10A

dditi

ons

Dur

ing

the

Year

Del

etio

n du

ring

the y

ear

As a

t 31

.3.20

11A

s at

31.3.

2011

As a

t 31

.3.20

10

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Tang

able

Ass

ets

Bui

ldin

g 66

1,170

-

- 6

61,1

70

113

,942

8

,120

-

122

,062

5

39,1

08

547

,228

Fur

nitu

re &

Fix

ture

s 9

,336

,582

1

,018

,610

1

02,2

32

10,

252,

960

4,5

00,4

07

589

,281

3

1,97

8 5

,057

,710

5

,195

,251

4

,836

,175

Equ

ipm

ent

7,5

57,9

96

498

,719

1

86,9

09

7,8

69,8

06

2,0

99,9

16

343

,430

5

2,07

6 2

,391

,270

5

,478

,536

5

,458

,080

Vsa

t - (P

) 3

,139

,919

-

- 3

,139

,919

5

96,7

25

112

,370

-

709

,095

2

,430

,824

2

,543

,194

Veh

icle

s 2

,530

,836

-

- 2

,530

,836

6

05,0

73

240

,430

-

845

,503

1

,685

,333

1

,925

,763

Cyc

le

7,0

90

- -

7,0

90

7,0

90

- -

7,0

90

- -

Com

pute

r 2

0,64

2,24

6 8

05,5

45

608

,183

2

0,83

9,60

8 17

,114

,726

1

,318

,938

4

51,3

30

17,

982,

335

2,8

57,2

73

3,5

27,5

20

Air

Con

ditio

ners

1

,071

,599

3

03,3

70

51,

636

1,3

23,3

33

219

,387

4

5,75

7 6

,416

2

58,7

28

1,0

64,6

05

852

,212

Inta

ngib

le A

sset

s:

Sof

twar

e 5

,300

,250

3

0,00

0 -

5,3

30,2

50

3,1

43,2

71

953

,672

-

4,0

96,9

43

1,2

33,3

07

2,1

56,9

79

Lis

ence

7

,384

,834

9

6,74

0 -

7,4

81,5

74

2,9

06,1

48

749

,867

-

3,6

56,0

16

3,8

25,5

58

4,4

78,6

86

Mem

bers

hip

Righ

ts

Mum

bai S

tock

Exc

hang

e 1

,000

,000

-

- 1

,000

,000

3

94,1

10

100

,000

-

494

,110

5

05,8

90

605

,890

TO

TAL

58,

632,

522

2,7

52,9

85

948

,960

6

0,43

6,54

6 31

,700

,795

4

,461

,866

5

41,7

99

35,

620,

862

24,

815,

684

26,

931,

726

Pre

viou

s ye

ar (0

9-10

) 6

0,47

3,63

9 4

,271

,787

6

,112

,905

5

8,63

2,52

2 32

,384

,333

4

,375

,336

5

,058

,874

3

1,70

0,79

6 2

6,93

1,72

6 2

4,25

6,56

9

30


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)SCHEDULE - 5 INVESTMENTSCurrent Investments :Quoted - Non trade (Market Value not Available )Motul Mafatlal Ltd. (100 shares of Rs.10/- each fully paid) 370 370Prudential Sugar (100 shares of Rs.10/- each fully paid) 700 700Usha India (320 shares of Rs.10/- each fully paid) 304 304Odyssey Video Co (100 shares of Rs.10/- each fully paid)) 1,432 1,432

2,806 2,806Less: diminution in value of shares 2,806 2,806

- -Long Term Investments :Un-quoted - Non tradeCochin Stock Exchange Ltd.(905 Equity shares of Rs.10/- each fully paid 2,507,700 2,507,700Nawani Corp (India) Ltd.(350,000 equity shares of Rs.10/- each) 17,500,000 17,500,000In Subsidiary Company :-Vertex Commodities & Finpro Pvt. Ltd (3,840,200 (P.Y 840,000) Equity Shares of Rs.10/- fully paid) 38,402,400 8,400,000

TOTAL 58,410,100 28,407,700

SCHEDULE - 6INVENTORIESInventories -Shares - 25,350Stock of Stationery - 59,477

TOTAL - 84,827

SCHEDULE - 7SUNDRY DEBTORS ((Unsecured Considered Good)A) Outstanding over 6 months 20,015,724 22,412,970B) Other debtors 15,509,645 21,047,911

TOTAL 35,525,369 43,460,881

SCHEDULE - 8CASH & BANK BALANCESBalance with Scheduled Banks: a) In Current Accounts 44,915,963 13,682,241 b) In Term Deposit Accounts (including interest accrued) 40,413,016 34,549,843Cash in Hand 7,308 37,394

TOTAL 85,336,287 48,269,478

31


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)SCHEDULE - 9LOANS & ADVANCES (Unsecured considered good )Advances recoverable in cash or in kind for value to be received 5,673,197 5,191,548Intercorporate deposit 30,020,278 33,365,278 Advance Income Tax (Net of provision) 1,805,566 1,372,867Advance Gratuity 346,201 316,215Deposits 58,234,085 84,197,915

TOTAL 96,079,327 124,443,823

SCHEDULE- 10CURRENT LIABILITIES & PROVISIONSa) Current LiabilitiesSundry Creditors - Amount due to Clients / Exchange 75,309,963 74,677,793 - Other Creditors 8,248,806 5,767,910 - Amount due to Medium, Small and Micro Enterprises - - Book Overdraft 443,996 59,366Unclaimed dividend 9,166 9,166Security Deposits 6,338,649 5,279,459Statutory liabilities 983,988 725,436

TOTAL 91,334,567 86,519,129b) ProvisionsPreference share dividend 156,911 416,370Dividend Tax on above - 70,762Provision Others 591,480 351,148Leave encashment 633,490 613,367

TOTAL 1,381,881 1,451,647

32


SCHEDULES FORMING PART OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2011

For the year ended on 31.03.2011

(Rs.)


(Rs.)SCHEDULE - 11INCOME FROM OPERATIONSBrokerage Income 68,405,554 78,203,351 Income from Merchant Banking 1,606,397 1,295,004 Income from Interest futures - 297,782 Income from DP Operations 2,431,676 2,629,881

TOTAL 72,443,627 82,426,018

SCHEDULE - 12 OTHER INCOMEInterest Income 3,846,160 3,139,079 Late Payment Charges 1,941,899 1,402,819 Software & AMC charges recovered 1,437,488 1,469,181 P.Vsat Recurring Charges recovered 743,700 737,650 Recovery on Shared Services 9,504,000 - Misc. Income - Others 4,327,685 4,469,600

TOTAL 21,800,931 11,218,329

SCHEDULE - 13EMPLOYEES’ REMUNERATION AND BENEFITSSalaries & Allowances 33,202,723 23,562,465 Contribution to Provident Fund & other funds 1,778,598 1,389,209 Staff Welfare Expenses 747,792 953,625

TOTAL 35,729,113 25,905,299

SCHEDULE - 14OPERATING EXPENSESAnnual Fee to Depository / Exchanges 347,709 378,710 AMC Charges 2,196,880 2,483,409 Clients Meet & Business Promotion Expenses 358,519 368,620 Consultation fee 657,338 563,552 Connectivity Charges 3,803,296 3,485,662 Depository Charges 691,791 542,024 Error Rectifi cation (54,811) 152,460 Investor Protection Fund 669 1,677 Marketing fee/Commission paid 24,294,337 25,056,776 Sub Brokerage 1,867,938 3,909,734 SEBI Turnover Charges 141,822 300,051 Stock Exchange Charges 555,146 198,259 Stock Differencial - 12 VSAT Charges 794,000 595,288

TOTAL 35,654,635 38,036,233

33



(Rs.)


(Rs.)SCHEDULE - 15ADMINISTRATIVE EXPENSESAdvertisement, Publicity and Business Promotion 720,709 329,768

Auditor's Remuneration 119,500 107,500

Bad debts Written off 167,525 482,788

Books & Periodicals 50,089 42,956

Communication Expenses 1,536,459 1,583,642

Data Entry expenses 480,621 683,520

Diminution in value of shares 25,350 -

Deposits Written off - 838,900

Insurance Premium 113,476 135,830

Legal Expenses and Filing Fees 258,037 563,123

Listing Fee 13,366 15,000

Loss on sale of Assets/ on assets srapped 359,610 174,227

Misc. Charges & Expenses 71,992 22,701

Offi ce Maintenance 693,212 1,021,696

Postage & Courier Charges 843,011 703,005

Power Charges 2,184,093 2,096,855

Printing & Stationery 570,850 476,838

Professional and legal Fees 1,209,262 401,200

Rates and Taxes 903,602 371,776

Rent 5,635,288 4,909,711

Repairs & Maintenance 1,096,833 781,221

SEBI Settlement Fee - 700,000

Meeting Expenses 97,857 -

Sitting Fees to Directors 184,000 70,000

Training Expense 183,658 470,544

Travelling and Conveyance Expenses 2,126,428 1,007,899

Vehicle Running and Maintenace Expenses 48,823 122,302

TOTAL 19,693,651 18,113,002

SCHEDULE - 16INTEREST AND FINANCE CHARGESBank Charges 103,761 97,048

Bank Guarantee Expenses 676,863 569,653

Interest 1,727,760 947,583

TOTAL 2,508,384 1,614,284

34


SCHEDULE – 17NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31.03.2011I SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Presentation of Financial Statements:

The Financial Statements are prepared under historical cost convention, on accrual basis of accounting in conformity with the accounting principles generally accepted in India and comply with the Accounting Standards referred to in section 211 (3C) of the Companies Act, 1956.

b) Use of estimates

The preparation of fi nancial statements in conformity with the generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of fi nancial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future periods.

c) Fixed Assets and Depreciation:

i) Fixed assets are stated at cost less accumulated depreciation and adjusted for impairment if any.

ii) The Company provides depreciation on straight-line method (SLM) at the rate specifi ed in Schedule XIV of the Companies Act, 1956.

iii) Depreciation on additions to fi xed assets is provided on pro-rata basis from the date of addition.

d) Intangible Assets:

Intangible assets comprise of Membership rights of Stock Exchanges, Computer software and Software licences. The Stock Exchange rights and Software Licenses are amortized over a period of 10 years and the Computer software is amortized over a period of 5 years on Straight Line basis.

e) Inventories - Shares:

The shares are valued at lower of cost or net realizable value.

f) Income:

Brokerage income is recognized on the date of the transaction, upon confi rmation of the trade by client. Interest on Suit fi led debtors are accounted on receipt basis since there is signifi cant uncertainty in collection. Dividend income is recognised when right to receive the same is established. Service income is recognised as per the terms of the contract/agreement entered into with the customers when the related services are performed.

g) Employee Benefi ts:

i. Long Term Employee Benefi ts

a. Defi ned Contribution plan

The company has defi ned contribution plans for employees comprising of Provident Fund and Employees State Insurance. The contributions paid/payable to these plans are charged to Profi t & Loss Account for the period to which they are related.

b. Defi ned Benefi t Plan

The company makes contributions to Employees’ Group Gratuity-cum-Life Assurance Scheme of Life Insurance Corporation of India. The net present value of the obligation for gratuity benefi ts as determined on actuarial valuation, conducted annually using the projected unit credit method, as adjusted for unrecognized past service cost if any and as reduced by fair value of plan assets, is recognized in the accounts. Actuarial gains and losses are recognized in full in the Profi t & Loss Account for the period in which they occur.

c. Other Long term Employee Benefi ts

The company has a scheme of Leave Encashment for eligible employees. Company’s liability as at the balance sheet date for such benefi ts is provided for on the basis of actuarial valuation under Projected Unit Cost Method, done by an independent actuary. Actuarial gains and losses comprise experience adjustments and effects of changes in actuarial assumptions and are recognized in the profi t & loss account as income or expense.

35


d. Short Term Employee Benefi ts

All employee benefi ts payable wholly within twelve months of rendering the service are classifi ed as short-term employee benefi ts and recognised in the period in which the employee renders the related service.

h) Income tax

Income tax is accounted in accordance with Accounting Standard on Accounting for Taxes on Income (AS 22), which includes current taxes and deferred taxes. Deferred tax assets/liabilities representing timing differences between accounting income and taxable income are recognised to the extent considered capable of being reversed in subsequent years. Deferred tax assets are recognised only to the extent there is reasonable certainty that suffi cient future taxable income will be available, except that deferred tax assets arising due to unabsorbed depreciation and losses are recognised if there is a virtual certainty that suffi cient future taxable income will be available to realise the same.

i) Investments

Long term investments are stated at cost less provision for permanent diminution in their values, if any. Current investments are stated at lower of cost and net realisable value.

j) Provisions and Contingent liabilities

Provisions are recognised when the company has a present obligation as a result of past events, for which it is probable that a cash outfl ow will be required and reliable estimate can be made of the amount of obligation. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refl ect current management estimates.

k) Earnings Per Share

Basic and diluted earnings per share is computed by dividing the net profi t attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year.

l) Leases

Disclosures as required by Accounting Standard 19, “Leases” issued by the Institute of Chartered Accountants of India, are given below:

(i) The Company has taken various offi ces under leave and license agreements. These are generally non- cancelable and range between 11 months and 5 years and are renewable by mutual consent on mutually agreeable terms.

(ii) Lease payments are recognized in the Profi t & Loss account under “Rent”.

II NOTES ON ACCOUNTS1. Remuneration to the Executive Directors:

2010-11Rs.

2009-10Rs.

Salary to the Managing Director 801,364 792,000

Perquisites - 56,377

TOTAL 801,364 848,377

2. Remuneration to Auditors:

2010-11Rs.

2009-10Rs.

Statutory Auditors Fee 60,000 60,000

Income tax audit fee 15,000 15,000

Other Services 44,500 32,500

TOTAL 119,500 1,07,500

3. Some of the debtors, advances, creditors, and security deposit are subject to confi rmation, reconciliation and adjustments if any. The management does not expect any material difference affecting the current year’s fi nancial statements.

36


4. Sundry debtors include old outstanding debts amounting to Rs.11,790,892 (Rs.6,735,421) in respect of which Company has initiated legal and other recovery actions, the proceedings of which are in different stages of progress. No provision for doubtful debts has been made in the accounts during the year since the management is confi dent that the debts are good and recoverable.

5. In the opinion of Directors, the current assets and deposits have the value as stated in the Balance Sheet, if realized in the ordinary course of business.

6. During the year the company has purchased and sold securities due to trade mistakes and failure of delivery of shares by clients. The profi t or loss thus incurred along with other mistakes due to operational and communication problems are recognised under the head Operating Expenses as Error Rectifi cation.

7. The company is maintaining DEMAT benefi ciary account with own Depository Services. The stock is transferred to the respective clients’ accounts only when the company receives a written request from the clients and after confi rming that they have enough credit / margin in their account.

8. Lien has been marked in favour of ICICI Bank Ltd in respect of Bank Deposits worth Rs. 3.80 million (P.Y Rs. 20 million) and in favour of HDFC Bank Rs. 13.25 million (P.Y. Rs. Nil) together with accumulated interest thereon, against bank guarantees issued by them on account of the Company.

9. Based on the guiding principles given in Accounting Standard on “Segment Reporting” (AS – 17) issued by the Institute of Chartered Accountants of India, the Company’s primary business segment is share broking. All other activities of the company revolve around the main business. As the company’s business activity falls within a single primary business segment, the disclosure requirements of AS – 17 in this regard are not applicable.

10. Contingent Liabilities not provided for:(Rs. In Lakhs)

Particulars

As at 31.03.2011

Rs.

As at 31.03.2010

Rs.

i) Counter guarantee issued in favour of bankers for guarantee given by them to NSE for margin requirements

340 410

ii) Guarantee given on behalf of subsidiary company Vertex Commodities & Finpro (P) Limited.

600 Nil

iii) Claims against the company not acknowledged as debt

a) Tax demand in respect of which:

i Company’s appeal is pending before the fi rst appellate Authority (Income Tax) for the Assessment Year 2007-08

11.11 11.11

ii) Company’s Service Tax appeal is pending before the CESTAT 4.97 4.97

b) Arbitration against the company pending in courts Nil 13.70

11. The major components of deferred tax assets and liabilities for the year ended 31-03-2011 are as follows:(Rs. In Lakhs)

Nature of timing differences2010-11

Rs.2009-10

Rs.

Deferred tax liability:

Net Depreciation 2,863,213 3,292,500

Deferred tax asset:

Un absorbed business loss 578,613 -

Other provisions allowable u/s.43B for Income Tax only on payment 528,282 300,200

Net deferred tax liability 1,756,318 2992,300

37


12. Earnings per share:

Particulars 2010-11 2009-10

Basic

(a) Profi t /(Loss) after tax as per Profi t & Loss A/c (Rs. 2,567,109) Rs. 2,282,640

(b) Weighted average number of equity shares outstanding 6,030,451 5,998,951

(c) Nominal Value of ordinary shares Rs. 10 Rs. 10

(d) Basic Earnings Per Share (Rs. 0.43) Rs. 0.38

Diluted

(a) Profi t after tax as per Profi t & Loss A/c (Rs. 2,567,109) Rs. 2,282,640

(b) Dividend on convertible preference shares Nil Nil

(c) Adjusted Net Profi t (Rs. 2,567,109) Rs. 2,282,640

(d) No of Equity shares Resulting from Conversion of Preference shares/ Equity share further to be issued

8,619,215 8,650,715

(e) Weighted Average number of Equity Shares 14,649,666 14,649,666

(f) Diluted EPS (Rs. 0.18) Rs. 0.16

13. Information on related party transaction as required by Accounting Standard –18

(a) Name of the related parties and description of the relation:

Name of the Party Relation

Transwarranty Finance Limited Holding Company

Kumar Nair Chairman & Managing Director

Vertex Commodities & Finpro Private Limited. Subsidiary Company

Transwarranty Private Limited. Associated Company

Transwarranty Advisors Private Limited. Associated Company

Ashok Mittal Chief Executive Offi cer

38


(b) Related Party Transactions:(Previous year fi gures in brackets below)

(Amount in Rupees)

Transactions Chairman & Managing Director

Associated Company

Holding Company

Subsidiary Company

Chief Executive Offi cer

Brokerage Collected 30,100 - 106,471 - -

(33,778) (-) (46,578) (-) (-)

Remuneration Paid 801,364 - - - 25,18,458

(848,377) (-) (-) (-) (-)

Expenses on shared services - - - 9,504,000 -

(-) (-) (-) (-) (-)

Reimbursement of Expenses - - - 169,247 -

(-) (-) (-) (-) (-)

Interest Received - - - 1,075,542 -

(-) (-) (-) (-) (-)

ICD Received - 930,900 40,505,622 30,694,533 -

(-) (-) (45,722,263) (-) (-)

ICD Paid - 4,143,096 26,951,622 30,694,533 -

(-) (-) (46,533,262) (-) (-)

Purchase of Fixed Assets - - - - -

(-) (-) (18,720) (-) (-)

Balance As on 31/03/2011

Amount Payable 95,807 - 28,633,163 - -

(2,785) (-) (15,079,161) (-) (-)

Amount Receivable - 30,020,278 - - -

(27) (33,365,278) (-) (-) (-)

39


14. Disclosure as required under Accounting Standard-15 on employee benefi ts for Gratuity and Leave Encashment is as under:-

Gratuity GratuityPrevious year

LeaveEncashment(unfunded)

Leave Encashment

Prev. Year 1. Change in the benefi t Obligations:

Present value of obligations as on 01. 04. 2010 1,087,007 996,570 613,367 396,830 Current Service Cost 364,317 277,957 458,908 311,474 Past Service Cost - - - - Interest Cost 84,651 69,345 26,230 12,481 Actuarial (Gain)/Loss on obligation 77,206 (245,009) 105,979 329,638 Benefi ts Paid (57,736) (11,856) (570,994) (437,056)Present value of obligations as on 31.03.2011 1,555,445 1,087,007 633,490 613,367

2. Change in Plan Assets:Fair Value of Plan Assets as on 01.04.2010 1,403,222 1,197,906 - - Adjustment to the opening balance - - - -Expected Return on Plan Assets 141,911 111,925 - - Employer's Contributions 404,868 103,266 570,994 437,056 Benefi ts Paid (57,736) (11,856) (570,994) (437,056)Actuarial Gain/(Loss) on Plan Assets 9,381 1,981 - - Fair Value of plan assets as on 31.03.2011 1,901,646 1,403,222 - -

3. Net (Asset) Liability (i) - (ii) : (346,201) (316,215) 633,490 613,367 4. Net Cost for the year ended 31.03.2011

Current Service Cost 364,317 277,957 458,908 311,474 Past Service Cost - - - - Interest Cost 84,651 69,345 26,230 12,481 Expected Return on plan Assets (141,911) (111,925) - - Actuarial (Gain)/ Loss recognised during the year 67,825 (246,990) 105,979 329,638 Adjustment (Gain) to opening value of planned assets

- - - -

Net Cost 374,882 (11,613) 591,117 653,593

Amount recognised in the Balance sheet (Asset) Liability

(346,201) (316,215) 633,490 613,367

Amount recognised in the Profit and Loss Account(Gain)/Loss

374,882 (11,613) 591,117 653,593

Principal actuarial assumptions:Discount rate 8.00% 7.00% 8.00% 7.00%Expected Return on plan assets 9.00% 9.00% -- --Salary Escalation Rate 5.00% 5.00% 5.00% 5.00%Attrition Rate 15.00% 15.00% 15.00% 15.00%Demographic Assumptions:Retirement age 58 YearsMortality rate LIC (1994-96)

Ultimate

40


15. The management has evaluated the long term investments and confi rms that there exist no circumstances which warrant provision on account of permanent diminution in the value of investments.

16. Employe Stock Option Scheme

a) The “Vertex Employe Stock Option Plan,2010” has been approved by the Board Of Directors of the company on 10th March, 2008.

b) The vesting period is over fi ve years from the date of grant, commencing after one year from the date of grant.

c) Exercise Period would commence one year from date of grant and will expire on completion of fi ve years from the date of vesting.

d) The options will be settled in equity shares of the company.

e) The company used the intrinsic value method to account for ESOPs.

f) The exercise price has been determined as follows

Grant Options Price per option Repriced to (on 31.3.2011 vide Postal Ballot

Grant I 462,500 Rs. 69/- --

Grant II 50,000 Rs. 195.15/- Rs. 145.50

Grant III 17,500 Rs. 227.35/- Rs. 145.50

Grant IV 25,000 Rs. 227.35/- Rs. 145.50

Grant V 100,000 Rs. 145.50/- --

g) Consequently, no compensation cost has been recognized by the company in accordance with the “Guidance Note on Accounting for Employee Share-Based payments” issued by the Institute of Chartered Accountants of India.

h) Details of movement of Options

Particulars As at 31st March, 2011 As at 31st March, 2010

Particulars Nos

Options outstanding at the beginning of the year Nil Nil

Options granted during the year 655,000 Nil

Options vested during the year Nil Nil

Options exercised during the year Nil Nil

Options forfeited during the year 31,500 Nil

Options lapsed /surrendered during the year Nil Nil

Options outstanding at the end of the year 623,500 Nil

i) Had fair value method been used , the compensation cost would have been higher by Rs.89.37 Lakhs (Previous Year Rs. Nil) Loss after tax would have been higher by Rs.89.37 Lakhs (Previous year Rs.Nil) and EPS basic would have been Rs. (1.92 )Per share (Previous Year Rs.Nil )Per share and Diluted EPS would have been Rs.(0.80) Per share (Previous Year Rs.Nil)

17. Details of Opening Stock, Closing Stock Purchase and Sales: (Qty in lakhs & Value in lakh Rs.)

Category Opening Stock Closing Stock Purchases Sales

Qty Value Qty Value Qty Value Qty Value

Equity 2010-11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Equity 2009-10 5.49 0.25 5.49 0.25 0.00 0.00 0.00 0.00

41


18. Inventories- Securities

Details of opening and closing inventories are given below :-

Name of the Scrip Qty as on 31.03.2011

Value as on 31.03.2011

Qty as on 31.03.2010

Value as on 31.03.2010

Atlos Ltd. - - 100 0Apple Credit Corp. Ltd. - - 100 159Arihant Cotsyn Ltd. - - 50 0Cauvery Software Engg. Systems Ltd. - - 100 0Classic Diamond India Ltd. - - 100 0Computer Power - - 500,000 0Dunlop Ltd. - - 100 0Femnor Mineral - - 100 0Goldstone Infrastructure - - 100 1,190Indo French Biotech Enterprise Ltd. - - 1,000 600Kerala Ayurveda Ltd. - - 100 0Kitex Garments Ltd. - - 2,000 5,000Koluthara Exports - - 4,900 0MOH Ltd. - - 20,000 1,000Nagarjuna Finance Ltd. - - 200 760Superstar Distillaries & Foods Ltd. - - 2,600 2,600Synthetics &Chemicals Ltd. - - 100 385TISCO SPN - - 15 0Trend Design - - 800 0TTK Health Care - - 100 1,588UTI Master share - - 50 468Vanady Chemicals - - 200 0Vatsa Corporation Ltd. - - 4,200 0Vysali Pharmaceuticals Ltd. - - 11,600 11,600Total - - 5,48,615 25,350

19. For the 27,758, 15% Non Cumulative Redeemable Preference shares of Rs.100/- each and 8,300,715, 0.5% fully convertible preference shares of Rs.10 each, no provision for dividend and dividend tax has been made in the fi nancial statement in the absence of distributable profi ts during the year.

20. Previous year fi gures have been re-grouped/reclassifi ed/re-arranged/recast wherever necessary to suit the current year’s classifi cation. Previous year fi gures are unless otherwise stated given in bracket.



42


STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT,1956, BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS

Registration No. �� State Code : �� Balance Sheet Date : �� Date Month Year

II. CAPITAL RAISED DURING THE YEAR : (Amount in Rs. Thousands)

Public Issue : �� Right Issue : �� Bonus Issue �� Private Placement : �� III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS : (Amount in Rs. Thousands)

Total Liabilities �� Total Assets : �� SOURCE OF FUNDS :

Paid -Up Capital �� Reserves & Surplus: �� Secured Loans : �� Unsecured Loans : �� Share Application : �� Deferred Tax Liability : ��

APPLICATION OF FUNDS :

Net Fixed Assets : �� Investments : �� Net Current Assets : ��IV. PERFORMANCE OF THE COMPANY: (Amount in Rs. Thousands)

Turnover/Other Income �� Total Expenditure : �� Profi t before Tax : �� Profi t after Tax: �� Earnings per share (Rs.) �� Dividend Rate (%) : ��

V. GENERIC NAME OF THE THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY (As per Monetary Terms)

Item Code No. �� Product Description ��



43


CONSOLIDATED FINANCIAL STATEMENTSAUDITOR’S REPORT

ToThe Board of Directors of VERTEX SECURITIES LIMITED

1. We have audited the attached Consolidated Balance Sheet of Vertex Securities Limited and its subsidiary as on 31 March, 2011, and also the Consolidated Profi t and Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These consolidated fi nancial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We report that the consolidated fi nancial statements have been prepared by the management of Vertex Securities Limited in accordance with the requirements of Accounting Standard (AS) 21- Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited fi nancial statements of the Company and the audited fi nancial statements of its subsidiary included in the consolidated fi nancial statements.

4. Attention is invited to Notes on Accounts point no.14 of Schedule 17, regarding evaluation of long term investment by the management. We have relied upon the confi rmation by the management in the absence of independent external evaluation.

5. As stated in Notes on Accounts point no.4 of Schedule 17, sundry debtors under the head current assets include old

outstanding dues. The sundry debtors outstanding for more than six months amounts to Rs.27.59 million. Further out of the total sundry debtors, for a sum of Rs.19.42 million, the Company has initiated legal and recovery actions, the proceedings of which are in different stages.

In view of the above, the quantum of realisability of old outstanding sundry debtors/ legally initiated debts is not ascertainable at this stage.

6. Subject to our comments in paragraph 4 and 5 above, we report that, on the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual fi nancial statements of the Company and its subsidiary, we are of the opinion that the said consolidated fi nancial statements give a true and fair view in conformity with the accounting principles generally accepted in India.

a. in the case of the Consolidated Balance Sheet, of the state of affairs of the Company as at 31 March, 2011

b. in the case of the Consolidated Profi t & Loss Account, of the consolidated results of operations for the year ended on that date; and

c. in the case of the Consolidated Cash Flow Statement, of the consolidated results of operations for the year ended on that date.




44

VERTEX SECURITIES LIMITED (Consolidated)

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2011

Schedule

As at 31.03.2011

(Rs.)

As at31.03.2010

(Rs.)I. SOURCES OF FUNDS1. Shareholders Fund : a) Share Capital 1 145,772,460 145,772,460 b) Share Capital Suspence Account 3,500,000 3,500,000 c) Share Application Money 17,480,272 - d) Reserves & Surplus 2 3,403,681 10,975,468 2. Loan Funds 3 a) Secured Loan 868,165 9,276,688 b) Unsecured Loan 36,811,613 19,052,065 3. Deferred Tax Liability 807,175 2,914,900 4. Minority Interest 3A 205,782 316,699

TOTAL 208,849,148 191,808,280 II. APPLICATION OF FUNDS1. Fixed Asset : 4 a) Gross Block 71,417,727 67,238,774 b) Less : Depreciation 39,230,672 34,406,286 c) Net Block 32,187,055 32,832,488 2. Investments: 5 20,007,700 20,007,700 3. Current Assets, Loans & Advances: a) Inventories 6 - 84,827 b) Sundry Debtors 7 176,511,262 52,551,320 c) Cash & Bank Balances 8 122,522,986 54,239,225 d) Loans & Advances 9 204,103,060 133,383,266

TOTAL (A) 503,137,307 240,258,638 Less: Current liabilities & Provisions a) Liabilities 10 345,016,633 99,762,387 b) Provisions 1,466,281 1,528,159

TOTAL (B) 346,482,914 101,290,546 Net Current Assets TOTAL (A)-(B) 156,654,393 138,968,092

TOTAL 208,849,148 191,808,280 Notes on Accounts 17The Schedule referred to above and attached notes form an integral part of the Balance Sheet



45


CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2011

Schedule


(Rs.)

For the year endedon 31.03.2010

(Rs.)INCOME Income from operations 11 93,440,132 92,222,416 Other Income 12 15,003,286 12,320,054

TOTAL 108,443,418 104,542,470 EXPENDITURE Employees' Remuneration and Benefi ts 13 38,691,084 26,711,515 Operating Expenses 14 47,396,778 45,658,196 Administrative Expenses 15 22,315,322 18,163,042 Interest & Finance Charges 16 4,462,076 2,203,238

TOTAL 112,865,261 92,735,991 PROFIT BEFORE DEPRECIATION, TAXATION AND PRIOR PERIOD ITEMS (4,421,843) 11,806,480 Less : Depreciation 5,366,185 5,266,647 Priliminary Expense w/o - 295 PROFIT (LOSS) BEFORE TAXATION AND PRIOR PERIOD ITEMS (9,788,028) 6,539,538 Provision for taxes Current Tax - 1,520,140 Deferred Tax (2,107,725) 1,636,000 Prior period Taxes exess provision written off (back) Income Tax - 125,636

TOTAL (2,107,725) 3,281,776 PROFIT (LOSS) AFTER TAX (7,680,303) 3,257,762 APPROPRIATIONS: Minority's Share (28,123) 12,195 Preference share Dividend - 416,370 Preference share Dividend tax - 70,762

TOTAL 28,123 499,327 BALANCE PROFIT (LOSS) CARRIED TO RESERVES (7,652,180) 2,758,435

Earning Per Share (Equity shares of face value Rs.10/- each) Basic EPS (1.27) 0.46 Diluted EPS (0.53) 0.19 Notes on Accounts 17 The Schedule referred to above and attached notes form an integral part of the Balance Sheet



46


CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 ST MARCH, 2011

Particulars2010-2011

(Rs.)2009-2010

(Rs.)A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profi t Before taxation (9,788,028) 6,539,538 Adjustments for: Add/(Less): Depreciation/Amortisation 5,366,185 5,266,647 Loss on assets sold/ written off 359,610 174,227 Miscellaneous expenditure written off - 295 Interest Paid & Bank Guarantee Expense 4,462,076 2,203,238 Interest Received (4,635,900) (3,507,763) Bad debts written off 167,525 1,321,688 Profi t on share trading - (1,335) Profi t on sale of asset - - Operating profi t before working Capital Changes (4,068,532) 11,996,535 Adjustments for Increase / (-)Decrease in : Trade & Other Receivable - Decrease/(Increase) (124,127,468) (11,020,879) Inventories - Decrease/(Increase) 84,827 10,516 Trade & Other payables - (Decrease)/ Increase 245,254,246 (31,418,237) Other payables/ Provisions -(Decrease)/ Increase 268,343 - Loans & Advances(Net) - Decrease/(Increase) (10,160,985) (5,466,942) Cash Generated from operations 107,250,431 (35,899,006)Income Tax and Fringe Benefi t Tax paid (529,246) (271,001)

B. NET CASH FLOW FROM OPERATING ACTIVITIES (A) 106,721,185 (36,170,007)Cash Flow from Investing Activities Purchase of Fixed Assets (5,127,913) (5,709,032) Sale of Fixed Assets 47,551 2,158,992 Interest Received Less Accrued 4,635,900 3,507,763 Investments in Subsidiary Company (2,400) - Inter corporate deposit (60,020,278) 31,346,743 Net Cash used in Investing Activities (B) (60,467,142) 31,304,465

C. CASH FLOW FROM FINANCING ACTIVITIES: Share application Money 17,480,272 - Receipt/Repayment of Vehicle Loans(net) (8,408,523) 2,615,089 Dividend and Corporate Dividend Tax (339,505) (487,132) Interest Paid & Bank Guarantee Expense (4,462,076) (2,201,903) Unsecured loan received/(paid) 17,759,547 (4,215,449) Net Cash used in Financing Activities (C) 22,029,715 (4,289,395) Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) 68,283,761 (9,154,936) Cash & Cash Equivalents as at the beginning of the year 54,239,225 63,394,161 Cash & Cash Equivalents as at the end of the year 122,522,986 54,239,225

AAs per our attached report of even date

Rahul Gautam Divan & Associates For and on behalf of Board of DirectorsChartered Accountants Rahul Divan Kumar Nair U. Ramachandran Partner Chairman and Managing Director Director James Pothen Jose Thomas Polachira Sandhya R. Nair Director Director Company Secretary


47


SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT 31 ST MARCH 2011

As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)SCHEDULE - 1

CAPITAL

AUTHORISED CAPITAL:

1) 10,820,000 EQUITY Shares of Rs 10/- each 108,200,000 108,200,000

2) 8,620,000 Preference shares of Rs.10/- each 86,200,000 86,200,000

3) 40,000 Non-Cumulative Redeemable Preference shares of Rs. 100/- each 4,000,000 4,000,000

198,400,000 198,400,000

ISSUED, SUBSCRIBED AND PAID UP CAPITAL :

5,998,951(P.Y 5,998,951) Equity Shares of Rs 10/- each fully paid up 59,989,510 59,989,510

a. 320,000 (P.Y.320,000) equity shares issued for consideration other than cash

b. 820,950 (P.Y. 820950) no. of equity shares of Rs 10 each issued as fully paid up to the shareholders of erstwhile Transwarranty Capital (P) Limited. as per the scheme of amalgamation.

8,300,715 (P.Y. 8,300,715) 0.5% Fully Convertible Preference shares of Rs.10/- each fully paid up

83,007,150 83,007,150

(8,300,715 (P.Y. 8,300,715) Preference Shares of Rs 10 each issued as fully paid up to equity share holders of erstwhile Transwarranty Capital (P) Limited. as per the scheme of amalgamation)

27,758 (P.Y. NIL), 15% Non Cumulative Redeemable (Preference shares of Rs.100/- fully paid-issued to erstwhile preference share holders of Transwarranty Capital (P) Limited)

- 2,775,800

27,758 (P.Y. NIL), 15% Non Cumulative Redeemable (Preference shares of Rs.100/- each)

2,775,800 -

TOTAL 145,772,460 145,772,460

SCHEDULE- 1 A

SHARE CAPITAL SUSPENCE ACCOUNT

31,500 (P.Y. 31,500) Equity Shares of Rs 10 each to be issued as fully paid up to the share holders of erstwhile Transwarranty Capital (P) Limited As per the scheme of amalgamation

315,000 315,000

318,500 (P.Y. 318,500) Preference Share shares of Rs 10 each to be issued as fully paid up to the share holders of erstwhile Transwarranty Capital (P) Limited. As per the scheme of amalgamation

3,185,000 3,185,000

TOTAL 3,500,000 3,500,000

48


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)

SCHEDULE - 2

RESERVES & SURPLUS

General Reserve as per last Balance sheet 269,212 269,212

Capital Reserve on consolidation (net) 3,779,600 43,505

Profi t and Loss Account

As per last Balance sheet 4,583,861 8,620,692

Less: Consolidation adjustments due to change in share holding in subsidiary (3,655,702) -

Less: Accumulated loss of amalgamating company - 7,895,836

928,159 724,856

Add: Change in Accounting Policy - 1,100,569

928,159 1,825,425

Add: Profi t (Loss) for the current year (7,652,180) 2,758,436

TOTAL (6,724,021) 4,583,861

Reserve on Amalgamation Account 6,078,891 6,078,890

TOTAL 3,403,681 10,975,468

SCHEDULE - 3

LOAN FUNDS

a ) Secured Loans

From HDFC BANK for Vehicle(Secured by hypothecation of vehicle -Motor Car) (Repayable with in one year Rs. 301,740/-)

837,580 1,046,457

From ICICI BANK for Vehicle(Secured by hypothecation of vehicle -Motor Car) (Repayable with in one year Rs.30,585/-)

30,585 200,416

Bank Overdraft(Secured against pledge/ lien of Fixed Deposit of Rs.62.89 Lakhs)

- 7,417,556

Term Loan from banks(Secured against pledge/ lien of Fixed Deposit of Rs.62.89 Lakhs)

- 612,259

TOTAL 868,165 9,276,688

b) Unsecured Loans

Inter Corporate loan 36,624,835 18,579,161

Interest accrued and due on above 186,778 472,904

TOTAL 36,811,613 19,052,065

49

ANNUAL REPORT 2010-11SC

HED

ULE

— 4

FIXE

D A

SSET

S

NA

ME

OF

ASS

ETS

GR

OSS

BLO

CK

DEP

REC

IATI

ON

NET

BLO

CK

As a

t 01

.4.20

10A

dditi

ons

Dur

ing

the

Year

Del

etio

n du

ring

the

year

As a

t 31

.3.20

11U

p to

31

.3.20

10A

dditi

ons

Dur

ing

the

Year

Del

etio

n du

ring

the

year

As a

t 31

.3.20

11A

s at

31.3.

2011

As a

t 31

.3.20

10

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Tang

ible

Ass

ets:

Bui

ldin

g 6

61,1

70

- -

661,1

70

113

,942

8

,120

-

122,0

62

539,1

08

547

,228

Fur

nitu

re &

Fix

ture

s 1

0,09

1,88

6 1

,032

,609

1

02,2

32

11,02

2,263

4

,674

,822

6

40,4

19

31,

978

5,28

3,264

5,

739,0

00

5,4

17,0

64

Equ

ipm

ent

8,5

54,6

06

592

,333

1

86,9

09

8,96

0,030

2

,225

,850

3

94,7

63

52,

076

2,568

,538

6,39

1,492

5

,717

,677

Vsa

t - (P

) 4

,182

,323

-

- 4,

182,3

23

776

,230

1

61,0

80

- 93

7,310

3,

245,0

13

2,5

43,1

94

Veh

icle

s 3

,060

,212

-

- 3,

060,2

12

874

,852

2

90,7

21

- 1,

165,5

72

1,89

4,640

3

,008

,038

Cyc

le

9,2

40

- -

9,24

0 9

,240

-

- 9,

240

- 8

70,6

76

Com

pute

r 2

2,69

6,50

8 1

,484

,291

6

08,1

83

23,57

2,615

1

8,08

6,71

3 1

,666

,355

4

51,3

30 1

9,301

,738

4,27

0,877

4

,390

,419

Air

Con

ditio

ners

1

,071

,599

3

23,1

60

51,

636

1,34

3,123

2

19,3

87

45,

783

6,4

16

258,7

54

1,08

4,369

8

52,2

12

Inta

ngib

le A

sset

s:

Sof

twar

e 5

,300

,250

3

0,00

0 -

5,33

0,250

3

,143

,271

9

53,6

72

- 4,

096,9

43

1,23

3,307

2

,156

,979

Lis

ence

9

,759

,980

1

,415

,520

-

11,17

5,500

3

,513

,351

1

,017

,295

-

4,53

0,646

6,

644,8

54

6,2

46,6

29

Mem

bers

hip

Rig

hts

Mum

bai S

tock

Exc

hang

e 1

,000

,000

-

- 1,

000,0

00

394

,110

1

00,0

00

- 49

4,110

50

5,890

6

05,8

90

NM

CE

100

,000

-

- 10

0,000

5

4,87

7 1

0,00

0 -

64,87

7 35

,123

45,

123

MC

X 2

51,0

00

- -

251,0

00

150

,600

2

5,10

0 -

175,7

00

75,30

0 1

00,4

00

NC

DEX

5

00,0

00

- -

500,0

00

169

,041

5

0,00

0 -

219,0

41

280,9

59

330

,959

NSE

L -

250

,000

-

250,0

00

- 2

,877

-

2,87

7 24

7,123

-

TO

TAL

67,

238,

775

5,1

27,9

13

948

,960

71

,417,7

27

34,

406,

285

5,3

66,1

85

541

,799

39,2

30,67

2 32

,187,0

55

32,

832,

488

Pre

vs y

ear (

09-1

0)

68,

977,

382

5,7

09,0

32

7,4

47,6

40

67,23

8,775

3

4,25

4,05

8 5

,266

,647

5

,114

,419

34,4

06,28

5 32

,832,4

89

30,

890,

586

50


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)SCHEDULE - 5

INVESTMENTS

Current Investments :

Quoted - Non trade (Market Value not Available )

(Motul Mafatlal Ltd. (100 shares of Rs.10/- each fully paid) 370 370

Prudential Sugar (100 shares of Rs.10/- each fully paid) 700 700

Usha India (320 shares of Rs.10/- each fully paid) 304 304

Odyssey Video Co (100 shares of Rs.10/- each fully paid)) 1,432 1,432

2,806 2,806

Less: diminution in value of shares 2,806 2,806

— —

Long Term Investments :

Cochin Stock Exchange Ltd.(905 Equity shares of Rs.10/- each fully paid 2,507,700 2,507,700

Un-quoted - Non trade

Nawani Corp (India) Ltd.(350,000 equity shares of Rs.10/- each) 17,500,000 17,500,000

TOTAL 20,007,700 20,007,700

SCHEDULE - 6

INVENTORIES

Inventories -Shares - 25,350

Stock of Stationery - 59,477

TOTAL - 84,827

SCHEDULE - 7

SUNDRY DEBTORS

Unsecured Considered Good:

A) Debtors outstanding over 6 months 27,587,482 30,217,068

B) Other debtors 148,923,780 22,334,252

TOTAL 176,511,262 52,551,320

SCHEDULE - 8

CASH & BANK BALANCES

Balance with Scheduled Banks:

a) In Current Accounts 51,532,558 15,788,475

b) In Term Deposit Accounts (including interest accrued) 70,977,790 38,411,289

Cash in Hand 12,638 39,461

TOTAL 122,522,986 54,239,225

51


As at 31.03.2011

(Rs.)

As at 31.03.2010

(Rs.)SCHEDULE- 9

LOANS & ADVANCES (Unsecured considered good)

Advances recoverable in cash or in kind for value to be received 6,633,777 5,335,426

Inter-corporate Deposits 60,020,278 33,365,278

Advance Income Tax 1,962,981 1,330,859

Advance Gratuity 346,201 316,215

Advance Service tax 478,949 93,592

Deposits 134,660,874 92,941,896

TOTAL 204,103,060 133,383,266

SCHEDULE- 10

CURRENT LIABILITIES & PROVISIONS

a) Current Liabilities

Sundry Creditors

- Amount due to clients/Exchanges 301,020,671 86,747,995

- Other Creditors 8,248,805 5,767,910

- Due to Medium, Small and Micro Enterprises - -

Book Overdraft 26,648,178 59,366

Unclaimed dividend 9,166 9,166

Security Deposits 7,857,969 6,357,365

Other liabilities 1,231,844 820,585

TOTAL 345,016,633 99,762,387

b) Provisions

Preference share dividend 156,911 416,370

Dividend tax on above - 70,762

Gratuity 5,040 18,701

Provision Others 643,119 386,287

Leave encashment 661,211 636,039

TOTAL 1,466,281 1,528,159

52


SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2011

For the year ended 31.03.2011

(Rs.)


(Rs.)SCHEDULE - 11 INCOME FROM OPERATIONSBrokerage Income - Equity 89,402,059 87,999,749 Income from Merchant Banking 1,606,397 1,295,004 Income from Interest futures - 297,782 Income from DP Operations 2,431,676 2,629,881

TOTAL 93,440,132 92,222,416 SCHEDULE - 12 OTHER INCOMEInterest Income 4,635,900 3,507,763 Late Payment Charges 1,941,899 1,402,819 Software & AMC charges recovered 1,693,416 1,670,369 P.Vsat Recurring Charges recovered 1,055,724 1,119,811 Misc. Income - Others 5,676,347 4,619,292

TOTAL 15,003,286 12,320,054

SCHEDULE - 13 EMPLOYEES’ REMUNERATION AND BENEFITSSalaries & Allowances 35,987,380 24,309,273 Contribution to Provident Fund & other funds 1,909,378 1,447,718 Staff Welfare Expenses 794,326 954,524

TOTAL 38,691,084 26,711,515 SCHEDULE - 14 OPERATING EXPENSESAnnual Fee to Depository & Stock Exchanges 496,202 523,710 AMC Charges 2,570,729 2,841,999 Clients Meet & Business Promotion Expenses 395,844 370,120 Consultation fee 683,460 634,430 Connectivity Charges 4,319,472 4,264,396 Depository Charges 713,471 559,404 Error Rectifi cation 2,414 183,946 Investor Protection Fund 669 1,677 Marketing fee/Commission paid 34,601,437 30,407,216 Sub Brokerage 1,867,938 3,909,734 SEBI Turnover Charges 141,822 300,051 Deposits written off - 838,900 Stock Exchange Charges 721,493 200,813 Stock Differencial - 12 Software subscription charges 39,900 - VSAT Charges 841,927 621,788

TOTAL 47,396,778 45,658,196

53



(Rs.)


(Rs.)

SCHEDULE - 15

ADMINISTRATIVE EXPENSESAdvertisement, Publicity and Business Promotion 1,004,726 329,768 Auditor's Remuneration 134,500 124,500 Bad debts Written off 167,525 482,788 Books & Periodicals 52,231 42,956 Communication Expenses 1,670,912 1,612,908 Data Entry expenses 480,621 705,943 Dimunition in the value of shares 25,350 - Donations 10,000 - Insurance Premium 128,777 165,728 Legal Expenses and Filing Fees 258,037 583,669 Listing Fee 13,366 15,000 Loss on sale of Assets/ on assets srapped 359,610 174,227 Merger Expense - 165,000 Misc. Charges & Expenses 72,000 22,709 Offi ce Maintenance 799,373 1,023,751 Postage & Courier Charges 870,283 714,981 Power Charges 2,472,578 2,254,518 Printing & Stationery 589,712 578,020 Professional and legal Fees 1,483,610 246,200 Rates and Taxes 1,123,464 415,703 Rent 6,387,245 5,269,711 Repairs & Maintenance 1,223,977 806,900 SEBI Settlement Fee - 700,000 Meeting Expenses 103,454 - Sitting Fees to Directors 184,000 70,000 Training Expense 187,658 470,544 Travelling and Conveyance Expenses 2,407,329 1,017,018 Vehicle Running and Maintenace Expenses 104,984 170,498

TOTAL 22,315,322 18,163,040

SCHEDULE - 16

INTEREST AND FINANCE CHARGESBank Charges 130,652 156,589 Bank Guarantee Expenses 933,662 680,316 Interest Paid 3,397,762 1,366,333

TOTAL 4,462,076 2,203,238

54


SCHEDULE – 17

SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2011.

I SIGNIFICANT ACCOUNTING POLICIES:

1. Investments other than in Subsidiaries have been accounted as per Accounting Standard-13 “Accounting for Investments.”

2. Other Signifi cant Accounting Policies

Other Signifi cant Accounting Policies are set out under “Signifi cant Accounting Policies” as given in the standalone fi nancial statements of the parent company

II. NOTES ON ACCOUNTS:

1. Principles of Consolidation:

The Consolidated fi nancial statements of Vertex Securities Limited,(Parent Company) have been prepared in accordance with the Accounting Standard 21 (AS 21) “Consolidated Financial Statements” issued by The Institute of Chartered Accountants of India.

The fi nancial statements of the Subsidiary used in the consolidation are drawn on the same reporting dates as that of the Parent Company, ie. 31st March 2011.

The Consolidated fi nancial statements have been prepared applying uniform accounting policies for like transactions and events in similar circumstances and appropriate adjustment have been made where the accounting policies are not uniform.

The fi nancial statements of the Company and its subsidiary have been combined on a line-by-line basis by adding together the book value of like items of assets, liabilities, incomes and expenses, after fully eliminating intra-group balances and transactions resulting in unrealized Profi t/Loss.

The value of investment over the cost to the Company’s share in the net assets of the subsidiary at the date on which investment is made, is recognized as Capital Reserve and is separately disclosed in the consolidated fi nancial statements.

2. Details of Subsidiary included in the consolidated fi nancial statements:

Name of the Subsidiary Country of Incorporation

Share in ownership Shares held by:

Vertex Commodities & Finpro (P) Limited India 99.44% (P.Y. 97.50%)

Vertex Securities Limited.

3. Some of the debtors, creditors, advances and security deposits are subject to confi rmation, reconciliation and adjustments. The management does not expect any material difference affecting the current year’s fi nancial statements.

4. Sundry debtors include old and outstanding debts amounting to Rs.19,427,697/- (P.Y. Rs. 10,913,575.19) in respect of which Company has initiated legal and other recovery actions, the proceedings of which are in different stages. No provision for doubtful debts is made in the accounts for the year since the management is of the opinion that these debts are good and recoverable.

5. In the opinion of Directors, the current assets and deposits have the value as stated in the Balance Sheet, if realized in the ordinary course of business.

6. During the year the company has purchased and sold securities due to trade mistakes and failure of delivery of shares by clients. The profi t or loss thus incurred along with other mistakes due to operational and communication problems are recognised under the head Operating Expenses as Error Rectifi cation.

7. Lien has been marked in favour of ICICI Bank Ltd in respect of Bank Deposits worth Rs. 3.80 Million (P.Y. Rs. 20.0 Million) together with accumulated interest thereon, against bank guarantees issued by them and in favour of HDFC Bank Ltd in respect of Bank Deposits worth Rs. 13.25 Million (P.Y. Rs. Nil) together with accumulated interest thereon, against Fixed deposits submitted by them of Rs.26.5 million (P.Y. Rs.Nil) to the National Stock Exchange in favour of the Holding Company. Bank deposits held by subsidiary company in favour of HDFC Bank Ltd. for Rs.25.0 Million (P.Y Rs. 3.75 million to ICICI Bank Ltd) and in favour of Axis Bank Ltd for Rs.5 million (P.Y.Rs.Nil) together with accumulated interest thereon against Bank guarantees issued by them in favour of the subsidiary.

55


8. Contingent Liabilities not provided for: (Rs. In Lakhs)

As at 31.03.2011 As at 31.03.2010

1. Counter guarantee issued in favour of bankers for guarantee given to exchanges for margin requirements

940 460

2. Guarantee given on behalf of Subsidiary Company

3. Claims against the company not acknowledged as debt

i) Tax demand in respect of which:

a) Company’s appeal is pending before the fi rst appellate the Assessment year - 2005-06 Authority (income tax) for the Asst. Year 2007-08

b) Company’s Service Tax appeal is pending before the CESTAT

ii) Arbitration against the Company pending in courts

600

11.11

4.97

Nil

NIL

11.11

4.97

13.70

9. Earnings per share:

Basic 2010-11 2009-10

(a) Profi t after tax as per Profi t & Loss A/c (Rs.7,652,180) Rs.2,758,435

(b) Weighted average number of equity shares outstanding 6,030,451 5,998,951

(c) Nominal Value of ordinary shares Rs.10 Rs.10

(d) Basic Earnings Per Share (Rs.1.27) Rs. 0.46

Diluted 2010-11 2009-10

(a) Profi t after tax as per Profi t & Loss A/c (Rs.7,652,180) Rs.2,758,435

(b) Dividend on convertible preference shares Nil Nil

(c) Adjusted Net Profi t (Rs.7,652,180) Rs.2,758,435

(d) No of Equity shares Resulting from Conversion of Preference shares 8,619,215 8,650,715

(e) Weighted Average number of Equity Shares 14,649,666 14,649,666

(f) Diluted EPS (Rs.0.53) Rs. 0.19

10. Employee Stock Option Scheme

a) The “Vertex Employe Stock Option Plan,2010” has been approved by the Board Of Directors of the company on 10th March, 2008.

b) The vesting period is over fi ve years from the date of grant, commencing after one year from the date of grant.

c) Exercise Period would commence one year from date of grant and will expire on completion of fi ve years from the date of vesting.

d) The options will be settled in equity shares of the company.

56


e) The company used the intrinsic value method to account for ESOPs.

f) The exercise price has been determined as follows

Grant Options Price per option Reprice to (on 31.3.2011 vide Postal Ballot

Grant I 462,500 Rs. 69/- --

Grant II 50,000 Rs. 195.15/- Rs. 145.50

Grant III 17,500 Rs. 227.35/- Rs. 145.50

Grant IV 25,000 Rs. 227.35/- Rs. 145.50

Grant V 100,000 Rs. 145.50/- --

g) Consequently, no compensation cost has been recognized by the company in accordance with the “Guidance Note on Accounting for Employee Share-Based payments” issued by the Institute of Chartered Accountants of India”.

h) Details of movement of Options

Particulars As at 31st March, 2011 As at 31st March, 2010

Options outstanding at the beginning of the year Nil Nil

Options granted during the year 655,000 Nil

Options vested during the year Nil Nil

Options exercised during the year Nil Nil

Options forfeited during the year 31,500 Nil

Options lapsed /surrendered during the year Nil Nil

Options outstanding at the end of the year 623,500 Nil

i) Had fair value method been used , the compensation cost would have been higher by Rs.89.37 Lakhs (P.Y. Rs. Nil) Loss after tax would have been higher by Rs.89.37 Lakhs (P.Y. Rs.Nil) and EPS basic would have been Rs. (1.92 )Per share (P.Y. Rs.Nil) and Diluted EPS would have been Rs.(0.80) Per share (P.Y. Rs.Nil)

11. Information on related party transaction as required by Accounting Standard –18

(a) Name of the related parties and description of the relation:-

Name of the Party Relation

Transwarranty Finance Limited Holding Company

Kumar Nair Chairman & Managing Director

Vertex Commodities & Finpro Private Limited. Subsidiary Company

Transwarranty Private Limited. Associated Company

Transwarranty Advisors Private Limited. Associated Company

Ashok Mittal Chief Executive Offi cer

57


(b) Related Party Transactions:(Previous year fi gures in brackets below)

(Amount in Rupees)

Transactions Chairman & Managing

Director

Director Associated Company

Holding Company

Subsidiary Company

Chief Executive

Offi cer

Brokerage Collected 30,100 -

(33,778) (-) (-) (-) (-) (-)

Remuneration Paid 801,364 - - - - 25,18,458

(848,377) (-) (-) (-) (-) (-)

ICD Received - 10,000,000 30,930,900 30,694,533 40,505,622 -

(-) (-) (931,000) (-) (45,722,263) (-)

ICD Paid - 10,000,000 4,143,096 30,694,533 26,951,622 -

(-) (-) (11,346,000) (-) (46,533,262 ) (-)

Interest on ICD - - - 781,295 - -

(-) (-) (-) (-) (-) (-)

Expenses on shared Services - - - 9,504,000 - -

(-) (-) (-) (-) (-) (-)

Reimbursement of Expenses - - - 169,247 - -

(-) (-) (-) (-) (-) (-)

Purchase of Fixed Assets - - - - - -

(-) (-) (-) (-) (18,720) (-)

Balance As on 31/03/2011

Amount Payable 95,807 - - - 28,633,163 -

(2,785) (-) (-) (-) (15,079,652) (-)

Amount Receivable - - 30,020,278 - - -

(27) (-) (33,365,278) (-) (-) (-)

58


12. Disclosure as required under Accounting Standard-15 on employee benefi ts for Gratuity and Leave Encashment is as under:

Gratuity Gratuity Previous year

Leave Encashment (unfunded)

Leave Encashment

Previous yeari) Change in the benefi t Obligations:

Present value of obligations as on 01. 04. 2010 1,105,708 1,016,241 636,039 409,434 Current Service Cost 368,121 286,257 491,226 321,264 Past Service Cost - - - - Interest Cost 85,280 70,722 26,864 13,047 Actuarial (Gain)/Loss on obligation 82,559 (255,656) 107,538 338,387 Benefi ts Paid (79,408) (11,856) (600,456) (446,093)Present value of obligations as on 31.03.2011 1,562,260 1,105,708 661,211 636,039

ii) Change in Plan Assets:Fair Value of Plan Assets as on 01.04.2010 1,403,222 1,197,906 - - Adjustment to the opening balance - - - -Expected Return on Plan Assets 141,911 111,925 - - Employer's Contributions 404,868 103,266 570,994 437,056 Benefi ts Paid (57,736) (11,856) (570,994) (437,056)Actuarial Gain/(Loss) on Plan Assets 9,381 1,981 - - Fair Value of plan assets as on 31.03.2011 1,901,646 1,403,222 - -

iii) Net (Asset) Liability (i) - (ii) : (346,201) 297,514 661,211 636,039 iv) Net Cost for the year ended 31.03.2011

Current Service Cost 368,121 286,257 491,226 321,264 Past Service Cost - - - - Interest Cost 85,280 70,722 26,864 13,047 Expected Return on plan Assets (141,911) (111,925) - - Actuarial (Gain)/ Loss recognised during the year 73,178 (257,637) 107,538 338,387 Adjustment (Gain) to opening value of planned assets - - - -Net Cost 384,668 (12,583) 625,628 672,698 Amount recognised in the Balance sheet (Asset) Liability

(353,016) (1,297,514) 605,769 636,039

Amount recognised in the Profit and Loss Account(Gain)/Loss

384,668 (12,583) 625,628 672,698

Principal actuarial assumptions:Discount rate 8.00% 7.00% 8.00% 7.00%Expected Return on plan assets 9.00% 9.00% -- --Salary Escalation Rate 5.00% 5.00% 5.00% 5.00%Attrition Rate 15.00% 15.00% 15.00% 15.00%Demographic Assumptions:Retirement age 58 YearsMortality rate LIC (1994-96)

Ultimate

59


13. The major components of deferred tax assets and liabilities as at 31st March, 2011 are as follows:

Nature of timing difference 2010-11 2009-10 Rs. Rs.Deferred Tax Liability:Net Depreciation 3,808,918 4,047,400Deferred Tax Asset:Unabsorbed Loss 2,447,381 808,700Unabsorbed Depreciation Other provisions allowable u/s43B for Income tax only on payment 554,362 323,800Net Deferred tax Liability 807,175 2,914,900

14. The management has evaluated the long term investments and confi rms that there exist no circumstances which warrant provision on account of permanent diminution in the value of investments.

15. i) Debts due from Directors as on 31.03.2011 : Rs. Nil (P.Y. Rs.27/-)

ii) Maximum amount of debt due from Directors at any time during the year 2010 – 11 : Rs. Nil (P.Y. Rs.27/-)

16. The company is maintaining DEMAT benefi ciary account with own Depository Services. The stock is transferred to the respective clients’ accounts only when the company receives a written request from the clients and after confi rming that they have enough credit / margin in their account.

17. Based on the guiding principles given in Accounting Standard on “Segment Reporting” (AS – 17) issued by the Institute of Chartered Accountants of India, the Company’s primary business segment is share broking. All other activities of the company revolve around the main business. As the company’s business activity falls within a single primary business segment, the disclosure requirements of AS – 17 in this regard are not applicable.

18. Remuneration to the Executive Directors:

2010-11Rs.

2009-10Rs.

Salary to the Managing Director 801,364 792,000Perquisites - 56,377

TOTAL 801,364 848,377

19. For the 27,758, 15% Non Cumulative Redeemable Preference shares of Rs.100/- each and 8,300,715, 0.5% fully convertible preference shares of Rs.10 each, no provision for dividend and dividend tax has been made in the fi nancial statement in the absence of distributable profi ts during the year.

20. Previous year fi gures have been re-grouped/reclassifi ed/re-arranged/recast wherever necessary to suit the current year’s classifi cation. Previous year fi gures unless otherwise stated are given in brackets.

As per our attached report of even date Rahul Gautam Divan & Associates For and on behalf of Board of DirectorsChartered Accountants Rahul Divan Kumar Nair U. Ramachandran Partner Chairman and Managing Director Director James Pothen Jose Thomas Polachira Sandhya R. Nair Director Director Company SecretaryMumbai Kochi-18May 20, 2011 May 20, 2011

60


STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956, RELATING TO SUBSIDIARY COMPANY FOR THE FINANCIAL YEAR 2010-11.

1. Name of Subsidiary Company : VERTEX COMMODITIES AND FINPRO PRIVATE LIMITED

2. The fi nancial year of subsidiary company ended on : 31st March, 2011

3. Number of shares in the subsidiary company held : 3,840,000 Equity Shares of Rs.10/- eachby Vertex Securities Limited at the above date fully Paid up

4. The net aggregate of profi ts/losses of the subsidiary company.So far as these concern the members of Vertex Securities Limited.

(i) dealt within the account of Vertex Securities Limited amounted to :

a. for subsidiary’s fi nancial year ended on 31-03-2011 : Rs. (5,085,071)

b. for previous fi nancial years of the Subsidiary Company : Rs. 475,590since this became subsidiary of Vertex Securities Limited.

(ii) not dealt within the accounts of Vertex Securities Limited amounted to:

a. for subsidiary’s fi nancial year ended on 31-03-2011 : Rs. (28,123)

b. to previous fi nancial years of the Subsidiary Company : Rs. 12,195 since this became subsidiary of Vertex Securities Limited.

STATEMENT PURSUANT TO SECTION 212 (8) OF THE COMPANIES ACT, 1956, RELATING TO SUBSIDIARY COMPANY FOR THE YEAR ENDED MARCH 31, 2011. In accordance with the General Circular issued by The Ministry of Corporate Affairs, Government of India.

Sr. No. Particulars Vertex Commodities And Finpro Pvt. Ltd (in Rupees)

A Capital 38,615,000

B Reserve (1,043,078)

C Total Assets 39,801,229

D Total Liabilities 39,801,229

E Details of investment

(Except in case of investment in Subsidiaries)

Nil

F Turnover 23,702,860

G Profi t before taxation (5,984,937)

H Provision for taxation(deferred Tax) (871,743)

I Profi t after taxation (5,113,194)

J Proposed dividend Nil

For and on behalf of Board of Directors Kumar Nair U. Ramachandran Chairman and Managing Director Director James Pothen Jose Thomas Polachira Sandhya R. Nair Director Director Company Secretary

Kochi-18 May 20, 2011


Regd. Offi ce: Thottathil Towers, 2nd Floor, Market Road, Ernakulam, Kochi - 682 018

ATTENDANCE SLIP

(Shareholders attending the Meeting in person or by proxy are requested to complete the attendance slip and hand it over at the entrance of the meeting hall).

I,____________________________________________________________________hereby record my presence at the 18th ANNUAL GENERAL MEETING of the Company being held at the “Sharon Hall” The International Hotel, M.G. Road, Ernakulam, Kochi-682 031 at 9.30 AM on Wednesday the 20th July, 2011.

______________________________________________________________________________ ______________________________________________________________________________ Full name of the Share holder Signature (in BLOCK Capitals)

Folio No. _____________________________________________________ DP ID* ________________________________________________

CLIENT ID* ___________________________________________________ No. of Shares ___________________________________________

______________________________________________________________________________ ______________________________________________________________________________ Full name of the Share holder Signature

*Applicable for shares held in electronic form.

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________


Regd. Offi ce: Thottathil Towers, 2nd Floor, Market Road, Ernakulam, Kochi - 682 018

PROXY FORM

I/We______________________________________________________________of ________________________________________________being

a Member/Members of VERTEX SECURITIES LIMITED (Folio Number____________________ DP ID*______________________

Client ID* ___________________hereby appoint _______________________________________________________________________

of_________________________________or failing him ________________________________of ____________________________________as

my/our proxy in my/our absence to attend and vote for me/us, and on my/our behalf, at the 18th Annual General Meeting of the

Company, to be held on Wednesday, the 20th July, 2011 and at any adjournment thereof.

Signed this _________________________________ day of ___________________________ 2011.

NOTES:

1. The proxy need not be a member.2. The member should sign across the stamp as per specimen signature registered with the Company.3. The proxy form duly executed should reach the Registered Offi ce of the Company not less than 48

hours before the time of meeting.

*Applicable for shares held in electronic form

Affi x Re.1

RevenueStamp

Shareholder

This pag

e is k

ept in

tentio

nally blan

k

This pag

e is k

ept in

tentio

nally blan

k

Documents

Vertex AR Cover 2011 - Bombay Stock Exchange · 2011-09-08 · Kochi – 682 018 Tel. No. 0484-2384848 Fax No. 0484-2394209 e-mail id : [email protected] CORPORATE OFFICE 403,